http://www.thestar.com/News/Insight/article/608947
During the Great Depression of the 1930s, two of the world's most "successful" economies were those of Fascist Italy and Nazi Germany.
In hindsight, this sounds perverse – even obscene. But at the time, political leaders from around the world watched the Italian and German economic experiments and, in many cases, lauded them.
During a 1937 visit to Germany, Canadian prime minister William Lyon Mackenzie King noted in his diary how impressed he was by Adolf Hitler's labour policies.
In the U.S., as German cultural historian Wolfgang Schivelbusch recounts in his book Three New Deals, then president Franklin Roosevelt pronounced himself "deeply impressed by what (Italian dictator Benito Mussolini) has accomplished..."
King and Roosevelt made these comments not because they favoured Hitler's murderous anti-Semitism or Mussolini's brutal blackshirt tactics.
Rather they were intrigued by the combination of authoritarianism and capitalism that the two dictators used to reduce unemployment and revive their respective economies.
Both Hitler and Mussolini spent massive amounts of government funds on public works and rearmament.
At the same time, their bans on independent trade unions ensured that workers wouldn't interfere with any recovery by demanding higher wages – an example of labour-management co-operation that appealed particularly to King.
Even more important than the praise of foreign leaders, however, was the fact that many, if not most, Germans and Italians liked what their dictators were doing.
The reason is fairly simple. With the notable exceptions of Jews, Communists, social democrats, liberals, Roma, gays, dissident pastors and anyone with a shred of conscience – most Germans and Italians were materially better off than they had been.
All of this is worth keeping in mind today as the world heads into what many economists believe will be the worst slump since the 1930s.
Because the Great Depression teaches us two things.
First, capitalism doesn't need liberalism or even democracy to be successful. In fact, in the '30s, many came to the not illogical conclusion that an authoritarian market economy could provide a higher standard of living.
Second, in times of stress, people are susceptible. They want strong leaders and fear outsiders. They are desperate to hold on to what they have and anxious to find scapegoats.
A version of this kind of right-wing populism aimed at Muslims swept the U.S., and to a lesser extent Canada, after the terror attacks of 9/11.
An economic version is waiting in the wings today.
The signs are there. In the U.S., right-wing radio host Rush Limbaugh is treated by much of the media as a fool. His rantings against President Barack Obama are deemed so beyond the pale that even Canadian-born, conservative ideologue David Frum has weighed in against him.
Yet Limbaugh is still avidly listened to by an estimated 20 million Americans each week, far more than read Frum's learned treatises.
What's more, Limbaugh's message of anger and resentment resonates. Many Americans are increasingly turning their rage against migrant Mexican workers believed to be stealing jobs. That's a Rush Limbaugh issue that's now raised by even Hispanic members of the U.S. Congress.
As the economy worsens, the message of right-wing populism will almost surely resonate more.
In Europe, there are similar rumblings.
British workers have protested against Italian and Portuguese labourers imported to do local jobs. While insisting that it is maintaining its open-door policy to other European Union members, the government there has quietly made it harder for non-EU immigrants to get work visas.
In France, the government of President Nicolas Sarkozy has persuaded carmaker Renault – in exchange for government aid – to move some of its auto production from Slovenia to Paris.
Sarkozy insists the move won't cost Slovenia any jobs. But the decision has unnerved Eastern Europe's low-wage countries that, until recently, were big fans of global trade.
Indeed, the recession has already brought political instability to Eastern Europe. With export markets drying up and their currencies foundering, Hungary and Ukraine face bankruptcy.
Bulgaria and Lithuania have been hit by protests. On Tuesday, the Czech government fell.
Meanwhile, the promises of those advocating the more liberal version of capitalism have proven remarkably hollow.
In the fall, leaders of the world's 20 main economies, the so-called G-20, promised not to raise any new trade barriers – even those permitted under international treaties.
Yet since then, almost all of these countries have broken this vow. The U.S. was the most flagrant with its Buy America provisions imbedded in President Barack Obama's stimulus package.
But the World Bank calculates that at least 16 other members of the G-20, including Canada, have introduced similar trade-restrictions measures since November.
The international body targets Canada's decision to subsidize North American auto plants in this country as one such measure that has caused distortions in the international trading economy.
None of which is to say that fascism is just around the corner. History rarely repeats itself in such an obvious manner.
Indeed, the modern version of authoritarian capitalism, Chinese capitalism, is neither racist nor (for the time being at least) imperialist.
Besides, if governments are willing to admit the failings of the market economy, there are ways to deal with this slump that do not require dictatorship.
But simplistic and dangerous ideas do exist out there. And if, as former Bank of Canada governor David Dodge suggested this week, the crisis continues for several years, and if governments can provide nothing more than ineffective market nostrums, these dangerous ideas will gain popular appeal.
That's the part of history that does repeat itself.
Thomas Walkom's column appears Wednesday and Saturday.
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