8—The New Deal as a Transition to Fascism?

MARCH 4, 1933, the day Franklin Delano Roosevelt took the oath as president, marked the lowest point of the Great Depression. Unemployment stood at nearly 25 percent. Almost every bank in the nation had closed. Small and medium-size businesses and farms were failing by the thousands. Major corporations had slashed production and jobs. Life among the majority of working and poor people was one of constant insecurity. It was not much better for a broad swath of the middle class who lost the most in the frightful plunge of business and profits since the Wall Street crash three years earlier. On the morning of the inauguration, every financial institution in the United States was closed. The New York Stock Exchange and the Chicago Board of Trade had suspended trading. “The financial machinery of the world’s most powerful capitalism had completely ceased to function,” wrote two communist writers, Bruce Minton and John Stuart, in 1940.1

Despite great hope that the president-elect would offer Americans a “new deal,” the economy had continued to nosedive after the election, adding to growing fears among all quarters of society that only drastic measures could save the nation from impending disaster. As the historian Ira Katznelson reminds us in his recent study of the New Deal, the period between Roosevelt’s election and his inauguration was filled with talk about whether the incoming president would require extraordinary powers to end the Depression. “At issue,” Katznelson has written, “was not whether the United States would permanently lose its democracy but whether, faced with grave dangers, it would have to undergo a period of emergency rule in which uncommon powers would be delegated from Congress to the president and the executive branch.” Even the liberal economist Stuart Chase had called for a “business dictatorship.” Walter Lippmann, the nation’s most powerful political columnist, proposed that Roosevelt be given extraordinary powers for a year. In one of his widely read op-ed pieces for the New York Herald Tribune, Lippmann advised Congress to “suspend temporarily the rule of both houses, to limit drastically the right of amendment and debate, to put the majority in both houses under the decisions of a caucus.” Visiting Roosevelt a month before the inauguration, Lippmann told his good friend that there might be “no alternative but to assume dictatorial powers.”2

Grasping what the nation wanted of him, Roosevelt declared in his inaugural address that he would use all his power to end the crisis. The nation faced an “emergency that has the potential to undermine the democracy itself.” As he would do repeatedly during his long presidency, Roosevelt asked Americans not to be overcome by fear. “Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form.” Certainly, he conceded, “the demands of the hour” brought “the risk and cost of violating fundamental principles.” Perhaps with Lippmann in mind, as Katznelson suggests, Roosevelt warned that Congress might not act promptly on the legislation he would soon send them, which would require a “temporary departure” from its normal proceedings. But that would bear consequences. “I shall not evade the clear course of duty that will then confront me,” Roosevelt cautioned. “I shall ask the Congress for the one remaining instrument to meet the crisis—broad executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.” The American people had given him “a mandate” to take action. “They have asked for discipline and direction under leadership. They have made me the instrument of their wishes. In the spirit of the gift, I take it.”3

Once in the White House, Roosevelt and his “Brain Trust” of core advisers, who had come together during his campaign, acted swiftly and boldly.⁴ The legislative whirlwind during Roosevelt’s first hundred days in office saved American capitalism from collapse and the nation from chaos. Remarkably, almost all of it was drafted by key members of his administration and then rushed through Congress with very little debate. In passing each piece of legislation, Congress gave unprecedented power to the executive branch of government to create several new agencies. Thus, the earliest phase of the New Deal marked a decisive step toward a permanent role by the state in the affairs of the private economy. At issue was the need for compensatory spending by the federal government to stimulate economic growth and lift the nation out of the Depression. In this transition to state capitalism, or more properly understood as state monopoly capitalism,⁵ the question for some in the mid-1930s was whether the New Deal was fascist or marked a transition toward the particular national form fascism would take in the United States.

This question is rather jarring. In their popular understanding and dwindling memory of U.S. history, Americans associate the New Deal with a now familiar liberal impulse to reform government to serve the interests of the people. This tendency has reduced complex historical processes to simple constructs in a narrative that glosses over or minimizes fundamental contradictions in the world’s foremost capitalist society and in its political order during the 1920s and 1930s. Consequently, the public knows even less about Roosevelt’s true motives and the objectives of the New Deal, and how both altered the meaning of liberalism as a political doctrine in the United States. In the name of liberalism, Roosevelt and his New Dealers took aim at the Hoover administration and the monopolists of Big Business for their callous indifference to human suffering. In defense, Hoover and those around him claimed that their policies of limited government intervention into the private economy and reliance on voluntarism by business leaders was a truer expression of liberal-capitalist orthodoxy—the doctrine of classical laissez-faire. Who then was the real liberal, Hoover or Roosevelt, the monopolists or the New Deal reformers? Was it Hoover who claimed to defend the classical liberal position of a free market operating unencumbered by the state that made capitalism and America work? Or was it Roosevelt the reformer who would bind the private economy to state power as never before, allegedly to serve the interests of the majority of Americans, but which in the end only strengthened monopoly and financial capital itself?

Such is the folklore of American liberalism. Certainly Roosevelt and his Brain Trust were sincere in their beliefs that immediate action by the federal government was necessary to save the millions of unemployed and destitute Americans. This has defined them as liberals in the pages of American history and in subsequent American political discourse. Yet, the New Deal required a qualitative leap by the federal government into the workings of the private economy—against the whole tradition of laissez-faire and the free market, the core of liberalism itself, which had characterized the history of American business enterprise since its inception.

Rejecting a socialist alternative, Roosevelt’s first task was to save the American capitalist system, starting with banking, the main source of economic power. Once the financial sector was stabilized, his administration could turn to halting the deflationary spiral and jump-start the economy toward recovery. To achieve this, however, government and the private economy needed to work in concert to restrict production, in the belief that rising prices would inflate the economy and ultimately lead to higher wages, increased consumption, and renewed prosperity. Herein lay the fundamental contradiction of the New Deal. Saving Big Business, that is, monopoly-finance capital, put it at odds with a genuine concern for the “forgotten man,” who, crippled by the Depression, needed government intervention on a massive and unprecedented scale to help him get back on his feet. Simply put, liberal reform in response to the abuses of liberal orthodoxy only made liberalism more corporate and subject to the power of the state. The reformulation of liberalism in the New Deal brought recovery to Wall Street but not enough to Main Street.

A close look at the New Deal from a standpoint of its sharpest critics at the time does much to reveal the chameleon-like character of American liberalism in the service of monopoly-finance capital and the role it plays in the coming of American fascism.

THE MAKING OF THE NEW DEAL

Roosevelt’s initial efforts, which historically provide a picture of capitalist leadership at its most effective, cannot be minimized. Within two weeks of Roosevelt’s entry into the White House, the new administration pushed legislation through a willing Congress that ended the banking crisis, cut federal expenditures, and raised new revenue. The day he took office every bank in thirty-two states had been shut down either by governors’ proclamations or other executive actions, and in several states where banks had remained open depositors could only withdraw 5 percent of their money.6 Furthermore, demands by depositors that their withdrawals be issued in gold coins instead of paper resulted in a huge and steady outflow of gold from U.S. banks.

As soon as he took office, Roosevelt declared a national bank holiday. Congress then quickly passed the Emergency Banking Act on March 9, enabling 70 percent of banks across the nation to reopen within a week’s time under strict government supervision. The Reconstruction Finance Corporation, which had been established under Hoover to provide federal loans to states and local governments, was pumped up to provide liquid capital in the form of loans to troubled banks while the Federal Reserve made loans to non-member state banks. The turnaround was breathtaking.7 In the following three weeks depositors returned $1.2 billion of currency to reopened banks. Additionally, to stop the drain on gold, the banking act provided the president with the power to control the flow of gold in and out of U.S. banks and then in and out of the nation. This was achieved in two executive orders: the first required the return of all gold coins or bullion to the Federal Reserve or member banks, as well as the return of all gold and gold certificates by member banks to the Federal Reserve itself. The second took the country off the gold standard by forbidding gold export unless it could be shown “to promote the public interest.”⁸ The departure from gold devalued the dollar which, it was hoped, would loosen credit, stimulate new investment in production, and raise prices that would help pay off debt—all aimed at raising employment and purchasing power. Ultimately, the Gold Reserve Act of January 1934 set the price of gold at $35 per ounce.

After restoring stability to the financial system, the administration turned to the immediate relief of the unemployed and the long-depressed state of agriculture. In short time, it pushed through Congress numerous initiatives that resulted in new agencies. Among them was the Federal Emergency Relief Administration (FERA), which provided millions of dollars to the states for jobs on various projects and direct relief to those unable to work. Another agency, the Civilian Conservation Corps (CCC), created jobs in natural-resource conservation and related projects to over a quarter-million young men. The Agricultural Adjustment Administration (AAA) dealt with the long-standing problem of overproduction in farm goods and disastrously low prices by creating a domestic allotment plan that asked farmers to restrict crop cultivation and livestock raised for slaughter. Farmers received federal subsidies in return. This seemingly forward step, however, was detrimental for millions of Americans who desperately needed food and other farm products. Indeed, the agrarian history of the United States during the New Deal is replete with stories from farmers and hungry people alike who considered such practices to be utterly mad. It even made some in Roosevelt’s liberal circle queasy. Agriculture Secretary Henry Wallace, though horrified at plowing under 10 million acres of cotton and the slaughter of 6 million piglets, could “tolerate it only as a cleaning up of the wreckage from the old days of unbalanced production” and certainly “not acts of idealism in any sane society.”9

On June 16, 1933, Roosevelt signed the National Industrial Recovery Act (NIRA), which established the National Recovery Administration (NRA), a centerpiece of the New Deal. Charged with creating unified action between government, business, and labor, NRA administrators set out to end the ruthless competition they believed had created the menace of overproduction in the marketplace. Its mission was defined in the principles and structures of its three main components or “titles.” Title I aimed primarily to stimulate industrial recovery by establishing federally supervised “codes” on prices of capital and consumer goods to end “unfair competition” in business enterprise. All were subject to presidential approval. It also contained provisions for labor. Section 7(a) stipulated that labor had the right to organize into unions and engage in collective bargaining; Section 7(b) established measures for determining maximum work hours, minimum pay rates, and working conditions in those industries covered by the codes, as well as banning yellow dog contracts. Title II allocated $3.3 billion for public works projects in conservation and natural resource development. To this end, it created the Public Works Administration (PWA) that also provided vast relief efforts. Title III gave the NRA the authority to take over the role of primary agent of reconstruction from the Reconstruction Finance Corporation created under the Hoover administration.¹⁰ In apparent recognition that the era of laissez-faire had run its course, the architects of the NRA—and the whole New Deal at that—believed that it could work on what Ira Katznelson described as a “massive voluntary endeavor, underpinned by public authority.”11

The goal of the NRA was a planned and managed economy operating on the basis of cooperation between capital and labor. Government would preside over industrial self-management, nothing new in the era of monopoly finance capitalism and, in fact, a cornerstone of corporate and Republican Party thinking throughout the prosperous 1920s. Now, however, the Roosevelt administration sought to legitimate this same idea in a new form. Instead of leaving Big Business to manage its affairs, NIRA made government a viable, though somewhat subservient partner. The administration gave all power to create codes on prices to Big Business, specifically to the trade associations that represented its collective interests. As they understood their charge, their chief task was to determine how to reap profits while avoiding ceaseless competition and, consequently, overproduction. Antitrust laws, which had failed to prevent this from occurring, were suspended in the newfound belief that cooperation would win the day. Labor would also benefit from this arrangement, or so was the claim. In theory, every code would establish maximum work hours and minimum wages in addition to fixing prices. Labor was guaranteed the right to organize and bargain collectively, and child labor was abolished. The NRA cheerfully promoted itself as the honest broker between business and labor. Roosevelt considered it a partnership in planning between government and business.¹²

Before the U.S. Supreme Court ruled the NIRA unconstitutional in May 1935 as an unwarranted invasion by government on commercial rights, more than 700 codes had been approved. Undoubtedly, the codes overwhelmingly favored business interests by facilitating the shift toward planned limitation of output while making sure that profitability was maintained. This was especially crucial in the production of capital goods since it was here that the crisis caused by overproduction in the early and mid-1920s had its roots. Nevertheless, higher rates of profit based on production limits meant that the share going to labor, both in the number of workers employed and the value of their wages, had to fall, which is exactly what happened. A blanket provision on codes governing all industrial workers stipulated an hourly wage for workers and a maximum workweek of 35 hours regardless of the specific conditions in each industry. The historian Alan Lawson, who considers the New Deal an attempt to build a “cooperative commonwealth” from the ruins of the Depression, concluded that NIRA never achieved the much-desired cooperation between government and business. In pursuit of self-interest, business could not hold to voluntary agreements despite what government deemed necessary for the general welfare of society. What ensued was a “race to the bottom” as those business establishments that tried to honor the code agreements were compelled to follow those who transgressed from the start.13 When that happened, the government could not enforce the codes. What emerged was an ill-coordinated aggregate of protective measures and massive confusion among all parties, except for consumer groups who were virtually absent from the deliberations.

For all its weaknesses, there is little dispute that the NIRA’s impact was immediately a positive one. Production and employment increased significantly in July 1933, just as hundreds of codes went into effect. Historian Robert McElvaine viewed this as a “boomlet” that had little to do with the NIRA and was more the product of increased federal spending, Roosevelt’s restoration of confidence, and the simple fact that the Depression had already reached its bottom.¹⁴ Apparently unknown to McElvaine was that the Marxist political economist Lewis Corey had already demonstrated this in 1934 in his book The Decline of American Capitalism. Corey attributed the upturn more to a “cyclical revival” during the first four months of 1933 which, quite naturally, was energized by the administration’s new policies and swift congressional action. Nevertheless, industrial production increased 50 percent as producers built up inventories and hoped for the trend to be sustained by the government’s inflation policies.¹⁵ McElvaine suggests that the anxiety about the NRA codes actually spurred manufacturers to build inventories by utilizing cheaper labor prior to the codes on wages going into effect. Consequently, many workers who were hired in the spring were fired in the fall.16 Profits had shot up in the first and second quarters, as total wages and employment also rose, 20 percent and 10 percent respectively. But the upturn ended in July. By November, half the gains registered in the first two quarters had been wiped out despite all the administration’s efforts to create equilibrium between supply and demand and devalue the dollar against gold. By the end of 1933 the inflationary measures had turned into their opposite. Prices rose as did production despite NRA intentions of balanced output. But wages lagged, and workers once again found themselves facing prospects of production cuts and joblessness. Thus the balance sheets came out decisively in favor of business.¹⁷

“Niraism,” as Lewis Corey called it, was Roosevelt’s means to establish “fair wages and fair profits” so equilibrium could be restored to a system threatened by the “unfettered” economic action of capitalists.¹⁸ Generally, the formula was based on a long-held conviction that what was considered good about capitalism would only survive by eliminating the bad. The architects of Niraism saw themselves promoting good capitalism by reining in the excesses, abuses, and greediness of laissez-faire during the New Era of the previous decade. To this end, the Roosevelt administration believed that the NRA would spur capitalists to further their own interests by raising wages and limiting profits in order to assure still higher profits. For Corey, Niraism marked two pivotal developments in American capitalism. The first was that the era of laissez-faire had ended. The second, only grasped by Corey and a few others who understood the contradictory forces at work, was that Niraism represented the necessary advance of state monopoly capitalism in response to a profound systemic crisis, which was symptomatic of capitalism’s decline and decay.

Some later historians and other writers echoed Corey, though not perhaps as deeply as this thorough Marxist economist. Robert McElvaine, who never consulted Corey’s work, wrote forty years later:

By almost any reckoning, the NRA was a colossal failure. Dominated from the start by large-business interests, it served them at the expense of the rest of society. Their first concern was to assure their own incomes so they sought to use the codes to guarantee their margins of profit on the basis of restricted production and higher prices. This was scarcity economics and it meant reduced purchasing power. Businessmen could survive in this way under continuing Depression conditions, but it would simply perpetuate the hard times, not bring recovery or help anyone else. Given its domination by business interests, the NRA offered little hope of bringing about recovery. As long as businesses were permitted to raise prices to coincide with (or exceed) mandated wage increases, there would be no redistribution of income and no stimulation of purchasing power.19

THE NEW DEAL FALLS SHORT

The doctrine of free-market capitalism that had guided the Great Boom and resulted in the Great Depression had run its course. Yet the New Deal actually signaled a more profitable era for Big Business even as the nation weathered the difficult years of recovery. Business leaders welcomed the NRA’s antitrust measures only because they were given a leading role in determining the content of the codes. Nevertheless, opposition from the Chamber of Commerce, the National Association of Manufacturers, and the American Liberty League mounted steadily. Organized in the fall of 1934 by representatives of the DuPont financial empire and other business titans, the Liberty League cultivated its own version of 100 percent Americanism by accusing Roosevelt and the New Deal for taking the nation toward two alien political doctrines, socialism or fascism. Well before the NRA was ruled unconstitutional, business leaders regularly ignored provisions in the codes as well as subsequent complaints from government officials. Having been saved just as the banks had been with the Emergency Banking Act, manufacturers took delight in improving business conditions with government as its willing partner, without admitting that any movement in this direction was made possible by rising public expenditures for public works and relief. Still, Roosevelt’s desired partnership in planning with business had its limits as far as the monopolists and big bankers were concerned.

Conceived as a means to create common ground between government and industry, the NRA marked a decisive move toward state monopoly capitalism in the United States by extending the federal government’s capacity to preserve constitutional democracy. In its devotion to saving capitalism, the Roosevelt administration had no choice—other than a socialist alternative—to leave the real power in the hands of Big Business, which sought at every turn to capitalize on the powers delegated to it in Title I. The result was maximum profits at the expense of labor, which could not stop business from sidestepping Section 7(a) whenever it could, especially when aided by complicit labor leaders. In no way would the Roosevelt administration stand in the way of profit and capitalist accumulation. Historians generally agree that Roosevelt had little concern for the right of collective bargaining when he entered the White House. What he wanted most was for business to finally recognize that the economy needed equilibrium. But in giving practically all the power to Big Business, the New Deal only encouraged its bigger partner to continue down the road to deflation while Roosevelt and his Brain Trust pursued other policies, mainly through currency manipulation—all designed to inflate the economy. The result was a New Deal at odds with itself. Broadus Mitchell, a labor historian and outspoken socialist who ran for governor of Maryland in 1939, called it “planned scarcity.” These and other measures, which included domestic price-fixing and reciprocal trade agreements, as well as the more egregious practice of crop and livestock destruction, aimed at saving U.S. capitalism at the expense of mass human need. As Mitchell saw matters, the failure of AAA administrators and their NRA counterparts was startling. “It nowhere seemed to occur to them that an economy which, for its correction and preservation, demanded such violence to reason, had better be abandoned than revived,” he wrote in 1947. “Though current thought was not so bold, was there ever a time when avowal of production for use, rather than for private profit, was more appropriate?”20

Some writers had said as much soon after the New Deal began. Benjamin Stolberg, an author and labor activist, and Warren Jay Vinton, who worked in the Roosevelt administration on issues of social security and public housing, offered their critique in a short book, The Economic Consequences of the New Deal, published in 1935. They criticized Roosevelt’s pragmatic approach, which glossed over irreconcilable capitalist contradictions because he and his advisers were bent on saving the capitalist system at all cost. The administration’s failure to confront the principal contradiction between capital and labor made any real recovery impossible. Instead of new policies grounded in a scientific and historical understanding of what caused the Depression, Roosevelt led his administration on a bold path of experimentation divorced from any theoretical premises. This sent them moving in all directions at once in an effort to achieve the impossible: restoring equilibrium to an economic system in which disequilibrium was a permanent feature. The American people faced the worst crisis in their history as the result of an “insidious and intricate malady within their economy.” That malady, Stolberg and Vinton wrote, was the “irresponsible power of great wealth.” The facts revealed an “invariable correlation between the upward concentration of wealth and the progressive crippling of our economy.” What could be done to balance an economy in which more than half the nation’s wealth was owned by less than half a million people and controlled by a handful of them? Such an effort could be “neither theoretically reconciled nor realistically compromised.” For Stolberg and Vinton, the Roosevelt administration had embarked on “crusades of compromise” aimed at a planned recovery without recognizing, or admitting, the necessity of reining in Big Business.²¹

Roosevelt and his Brain Trust laid out legislation based on an “experimental method” of “trial and error” and devoid of any grounding in history, economic science, or social-political theory. The worst offender was the president himself:

Mr. Roosevelt has the kind of an open mind which accepts with equal hospitality the most contradictory views and the most irreconcilable facts. His whole policy is bent on ignoring the contradictions in our economy … [and] tries to make for a saner economy by strengthening all the opposing forces of the status quo, thereby inevitably strengthening the forces already in power.

For Stolberg and Vinton, the architects of New Deal policies had proceeded from a “technique of correlating its own intellectual confusions and liberal gestures with our economic disintegration and social chaos.” Here was the bankruptcy of the administration’s experimental method. The New Dealers willingly ignored the fact that “science performs no experiments which are not guided ideologically, by the strictest possible theoretical background.” They had gone astray from the start in their opportunism, especially in using the word new, which Stolberg and Vinton declared “an old subterfuge of the American mind in escaping unpleasant reality.” The New Deal “would introduce ‘social planning’ without changing our property relations.” This was no different from the New Era of 1920s prosperity that “sought to make us all rich without disturbing the rich.”22 Despite his declaration of a new deal for the millions who had been leveled by the Depression, Roosevelt could not completely break with the central tenets of laissez-faire capitalism held by Big Ownership during the 1920s that resulted in great wealth and growing inequality at once. If only Roosevelt had recognized that the seeds of the bust were in the boom. Now that the crisis had come, neither the president nor the people around him could abandon their commitment to the monopolies and the big banks. For Stolberg and Vinton, “capitalist recovery, on the classic lines of laissez-faire” had been “arrested” while the “only economic alternative, social planning on socialist lines, had been sedulously avoided.”23

The Depression, they argued, was hatched in the prosperity of the New Era a decade earlier. Citing statistics that showed the widening income gap between the wealthy capitalists at the top and the rest of the society, Stolberg and Vinton saw clear and ominous signs of a massive, upward redistribution of national income that led to economic collapse. In its quest for profits, Big Ownership farmed out capital to build plants that were not needed, thus leading to overproduction and saturated markets. The lack of productive investment outlets only fueled speculation in credit and stocks that sustained consumption as much as possible until the whole thing collapsed in 1929. During Hoover’s term as president, the RFC had pumped nearly $2 billion of public money “in defense of private fortunes.” But keeping the banks solvent to support the market at its lowest points only enabled Big Ownership to buy out small enterprises at “bargain prices” during the worst years of the crisis. It was then that Big Ownership got even bigger and, in so doing, increased its percentage of the declining national wealth. Deeming further investment no longer profitable, heavy industry closed its doors. Wages of the consuming classes fell by two-thirds, negatively impacting production of consumer goods. Investment in the production of both capital and consumer goods ceased. Stagnation and paralysis then extended to finance capital itself.²⁴

Statistics showed that the New Deal did not halt the upward distribution of national wealth. In 1933, taxpayers who made less than $10,000 a year earned even less than they did a year earlier when the crisis was most acute. But the same could not be said for the top 8,000 with incomes of over $50,000, who increased their takings by 10 percent, the top 2,000 whose incomes rose by 16 percent or, even more astoundingly, those whose annual incomes of $1 million or more increased by almost 50 percent. “Under the New Deal, exactly as in the New Era,” they wrote, “Big Ownership profited enormously at the expense of all the rest of us.” From October 1933 to October 1934, real weekly wages for industrial workers declined by 2 percent. “Yet the dividends of our great corporations increased 17 per cent in the same period. And their industrial profits in the first nine months of 1934 were 76 per cent greater than during the same period in 1933.”25

Stolberg and Vinton took a dim view of the middle class for failing to recognize what the New Deal meant for them, especially since Roosevelt’s promise played a vital role in his election. “The middle class necessarily misreads its hand,” they wrote. “It does not know its place in American life, for its psychology infects the whole of it. And it does not understand its function which is manifold, ambiguous, and contradictory. Its interests are so hopelessly confused in its own mind that all it can do is organize its own confusion.” It is “a bastard and a mongrel” at once: “It is a bastard class, for it partakes of both capital and labor and yet is neither. And it is a mongrel class because four different and often hostile strains make up its heterogeneous bulk.” The bulk included 6.5 million farmers (excluding laborers and sharecroppers), 2.5 million small business entrepreneurs, 1.5 million administrators of business enterprise, and the vast majority of the million professional and pseudo-professional people. Most important, the lines between the middle and working classes were far from clear. “The frayed white-collar worker, though a veritable caricature of the petty bourgeois, is so pathetically wage-dependent that he obviously belongs with labor.”²⁶

As divided as it was along income and occupational lines, the middle class as a whole was delusional in the belief that its interests were identical to those of Big Business. It looked to the ruling class for security, social status, and, especially, the quest for property. Just like the worker, however, the typical petty bourgeois—farmer, small merchant, salaried employee, skilled artisan, or even the well-paid worker—remained a slave to capital and was forever living on the margins of an economy dominated by Wall Street. The middle class had voted for Roosevelt and his promise of a new deal. Once implemented, however, it did nothing to alter its standing in the economic order. The New Deal did not save their small speculative investments in stocks and securities—only their farms or their homes—and perhaps only for the moment. Limited government action had prevented foreclosures by assuming their mortgages, but it did not scale them down. “The debtors still remained in debt up to their necks.”27

Having lost so much under Hoover, the middle class found little rebound with Roosevelt. Of all its groupings, the farmer had made out best, though Stolberg and Vinton attributed that to “the ring-around-the-rosy of the scarcity competition which [was] the essence of the whole recovery program.” The AAA had set out to organize agricultural scarcity in competition with industrial scarcity. In the end, it was bad for the farmer. While prices on farm goods rose, so did prices on the manufactured goods he needed to buy. Farm exports failed to rise even with the stimulus of a devalued dollar. Raising farm prices while keeping up protective tariffs kept the American farmer from free access to the world market. While the Department of Agriculture determined that 50 million marginal acres of land should be forced out of cultivation, it gave little support to the 2.5 million people who were living on them as mainly subsistence farmers. As for the small retailer caught between the rising prices of the NRA and the impoverishment of his customers, the volume of his business amounted to little more than half of what it was in 1929. “Yet he cannot cut the highest item from his overhead by firing the hired man within himself…. The small producer is being messed up by the cartelizing tendencies of the N.R.A.” The small storekeeper, the small manufacturer, and even the independent craftsman, faced a shrinking future in an economy driving toward ever greater efficiency through large-scale production. In the long run, government could have reversed the social forces that were liquidating him. Instead, the New Deal did not do for the small capitalist what it had done for big banker and industrialist.²⁸

There was something quite revealing about the plight of the middle class:

The New Deal cannot help the worker in him, whom he denies, without attacking his ownership. And it cannot help the owner in him, whom he cherishes, without entrenching the vested interests which exploit him. The truth is that the middle class is hopelessly caught in the deepening struggle between capital and labor and so is the New Deal. Indeed, the more “liberal” its gestures, the more nearly it expresses the doomed liberties of the Forgotten Man.

The tragedy of the New Deal is that the middle class which it politically represents immobilizes it psychologically; and thus demobilizes it as an effective force in combating Big Ownership.29

If the middle class held to the fiction that its interests were the same as ownership, stranger still was the “psychological identification” of the American worker with the middle class. This had been building since the late nineteenth century with the coming of mass consumer society. The growth of large-scale industry and monopolies had opposed a trade union movement that had incorporated the spirit of “rugged individualism” molded by the frontier experience. The new frontier was now an industrial one, and its pioneers were just as “imaginative, reckless, able and unscrupulous” as their predecessors. Labor movements were “confused and ineffectual.” Under the leadership of the AFL, skilled workers had rolled up their sleeves and fought the bosses for higher wages, shorter hours, and better working conditions. But they had shed all remaining vestiges of socialist thinking and made clear their “hatred of all ideology.” Here was the “pure and simple trade unionism” of the AFL. Having no distinct political identity, it succumbed to “the logic of modern capitalism.” From the beginning the AFL acknowledged the rights of private ownership of capital, and in so doing “accepted its concept of labor as a commodity,” which made work a thing for sale and the employer just another customer. From this point of view “it was an easy step to the property-mindedness of the petty bourgeois.” Just like the storekeeper, the skilled craftsman as an “aristocrat” developed an utter contempt for the unskilled workers who flooded into American cities before the Great War in 1914, most of them coming from countries in eastern and southeastern Europe. “Above all,” Stolberg and Vinton noted, the labor aristocrat “kept the Negro out of his unions, thus forcing him into a long and tragic history of strike-breaking.”30 From all this,

the skilled worker was able to raise his wages till he could live like the petty bourgeois he was. He came to share the outlook of the middle classes politically, socially, and culturally. He bitterly opposed every expression of class consciousness within the ranks of labor. Red-baiting became his favorite sport. He dreaded and fought against the rise of a political labor party. He voted the Republican or Democratic ticket.³¹

In light of these irreconcilable contradictions, the entire New Deal program was for Stolberg and Vinton “in essence nothing but a well-intentioned synthesis of errors.” A concerted effort by the government aimed at recovery required greater abundance and consumption, not “scarcity.” Strangest of all New Deal illusions was the dream to make Big Ownership accept an economy of abundance. Committed to saving free enterprise and wedded to nothing more than bold experimentation without full knowledge of the facts, the New Dealers sought to go against the very logic of capitalism as “an economy of measured scarcity.” As they wrote: “Business is successful to the extent to which it gauges correctly that optimum point of profit at which a maximum price coincides with a maximum demand.” It was vitally important for business leaders to prevent an abundance of goods from flooding the market. The same held true in times of boom and bust alike:

In boom times production is tempted into abundance and scarcity gets out of hand. Capitalist recovery from the ensuing Depression lies in the reorganization of scarcity. During the New Era Big Industry blundered into a disastrous abundance. And its potential productivity is now so great that it cannot get out of the Depression under its own power. It needed the aid of government to reestablish scarcity and to enforce recovery; and that is exactly what the National Recovery Administration is all about. The codes, avowedly written for the “regulation of competition,” are obviously an apparatus for industrial scarcity-mongering.32

The New Deal originated and unfolded from a bold experimental method that Roosevelt and his architects believed could bridge the irreparable divide between capital and labor in a time of crisis. Its bottom line was to curtail the excesses of Big Business to prevent overproduction and saturated markets. This meant learning from past errors and planning ahead. The solution was to revitalize the economy by integrating industry and agriculture into a shared program. However, it was a scarcity program that contradicted the immediate needs of the working class and more employment at higher wages. Thus the New Deal flew in the face of the majority of Americans who needed an economy of abundance. This was not the case for the New Dealers who believed their mission was to save the capitalist system. As Stolberg and Vinton noted incisively, the AAA and the NRA were “the first and foremost of the New Deal panaceas” that helped to “render more explicit, through an enormous administrative apparatus, what has always been implicit in the nature of Big Ownership. Under capitalism, scarcity is the life of the trade.”³³

For Stolberg and Vinton, the New Deal created a stalemate between capital and labor. In trying to right the imbalance of economic life, it strengthened all its contradictions. For Big Ownership it was necessary to safeguard profits and to keep intact the instruments of its financial domination. For those in the middle class who could afford to invest in stocks, all efforts to protect their modest investments only served the interests of big bankers and financiers who controlled the market. For labor, the New Deal sought to raise wages, increase employment, and assure some minimum economic security, though it opposed labor’s vital need for greater abundance.

All this led Stolberg and Vinton to conclude that there was only one outcome when profits rose and wages lagged. Behind the New Deal’s “vivid confusion,” the redistribution of the national wealth was “stealthily and fatally progressing upwards,” while the power of Big Ownership grew steadily larger. “And unless the government succeeds in reversing this disastrous process, Big Ownership is bound to intensify the crisis in the long run.”34

WAS THE NEW DEAL FASCIST?

The contradictions of American capitalism in the New Era of the 1920s and the subsequent Depression it brought required a qualitative leap in state power to manage the crisis and save the economic system from collapse. But its advance in the guise of the New Deal contained the elements of a crisis all its own. In clinging to existing property relations dominated by monopoly and financial capital within the limits of constitutional democracy, the New Deal did not resolve the fundamental contradictions between capital and labor. It only strengthened them. Its course from 1933 to 1940 marked the final phase in the transition to state monopoly capitalism in the United States. Some journalists and political writers even saw the genesis of fascism in American capitalism, comparing Roosevelt’s bold steps in a general crisis and national emergency to what fascists had done in Italy and Germany.

Indeed, in the media there was a visible and vigorous discussion about the relationship between fascism and capitalism that began after Roosevelt’s inauguration. Must America go fascist? The editor of Current History magazine, E. Francis Brown, who knew the history of U.S. ties to fascist Italy and the praise bestowed on Mussolini’s corporatist government by American business and political leaders, wrote that “the new America will not be capitalist in the old sense, nor will it be Socialist. If at the moment the trend is toward Fascism, it is an American Fascism embodying the experience, the traditions and the hopes of a great middle-class nation.”35

Discussion along these lines picked up over the next two years. Most of it went beyond straightforward comparisons of political differences between American liberal democracy and European fascist dictatorship. Instead, many writers employed their knowledge of political economy and class analysis to determine which political and social forces constituted the main fascist threat in the United States. Most deemed fringe organizations such as the Silver Shirts and other groups that emulated Mussolini’s black shirts or Hitler’s brown shirts as insignificant. None ever came close to creating a mass movement as happened in Italy or Germany. On the other hand, there were definite affinities between the New Deal and Italian fascism. The New Deal bore strong resemblances to the corporatist state established in Italy in its approach to reconciling the antagonism between capital and labor. Both Mussolini and Roosevelt had made clear their commitment to maintain and strengthen capitalism in their respective nations. Consequently, the fascist character of the New Deal could not be easily dismissed, especially given the high praise that American businessmen and politicians had lavished on Mussolini. Three Republican presidents of the 1920s had looked favorably on Mussolini’s formula to transform Italy from a crisis-ridden nation in the years immediately following the Great War. Both nations were inextricably linked in the 1920s. American bankers had paved the way for the export of U.S. capital in the form of direct investments and business partnerships in Italy, which made them the most valued of all U.S. partners in Europe. Mussolini always feared losing American capital until conditions in Europe dictated another course for Italian fascism. Roosevelt was no different. In June 1933, he wrote that he was deeply impressed by what Mussolini had “accomplished and by his evidenced honest purpose of restoring Italy and seeking to prevent general European trouble.” A short time later, Roosevelt admitted even more: “I don’t mind telling you in confidence that I am keeping in fairly close touch with the admirable Italian gentleman.”³⁶

In the June issue of Harper’s Magazine, J. B. Matthews and R. E Shallcross argued that the question of whether the United States must go fascist had suddenly become “appropriate and inescapable.” As they wrote:

If an Americanized form of fascism is in the making, now is the time to conduct a free inquiry into the conditions that permit it, the social forces that will be served by it, and the traditional elements in American life that will react sympathetically to a dictatorship of reaction.37

What conditions? The New Deal had failed to end the crisis and now called for more “stringent controls.” All the experiments tried by the New Dealers had failed to restore employment to a sufficient number. And those who were employed were not earning enough to keep pace with rising prices and the higher cost of living. The “mild measures” of the New Deal had failed, thus preparing the way “for accentuating the tendency toward fascist control.” Yet Matthews and Shallcross admitted that no one could predict “the precise point on the political thermometer where the conditions for fascism exist.”³⁸

Still, a fascist turn was plausible since the crisis was far from over. The New Deal in its failure revealed the paradox of capitalist progress: rising poverty within continued growth and now aimed at recovery. Matthews and Shallcross explained why:

The productive capacity of capitalist society is matched only by its consumptive inadequacy. Our potential plenty has become most obvious at precisely the moment when poverty is most completely socialized. Our planned recovery is not a planned economy. The fundamental principle of a planned economy is the organization and correlation of the grand aggregate of available resources with a view to higher living standards for the masses. Without this as the dominant and ever-present purpose there is not even a beginning of planned economy.³⁹

Rather than a sound plan for recovery, the New Deal presented what they called “planned sabotage,” based on a view they attributed to the American economist Thorsten Veblen, as a method he considered “the conscientious withdrawal of efficiency” from production. Americans needed abundance. Instead of increasing production, the New Deal went in the other direction. Its objective was “scarcity profits” to ensure that “price is king.” Matthews and Shallcross recognized the basic contradiction rooted in political economy:

An economy of abundance is implicit in the power age, but the potential abundance has reached such proportions that its actualization would spell disaster for the entire debt structure of finance capital and the disappearance of profits derived from ownership. Capitalism cannot, therefore, accept the implications of the power age and its abundance. It must operate under a natural or an enforced scarcity.40

The New Deal’s “strictly capitalist” approach to the problem of mass production determined that planned sabotage also included the necessity of currency manipulation. Though an increase in prices diminished the purchasing power of the consumer, it added to the “paying power of the debtor” and, supposedly, would bring “prices and debts into a workable relationship.” Give people more money so they can pay their debts! However, the administration had not succeeded in sufficiently inflating the economy to the point where such recovery efforts could gain traction, instead fueling “powerful political forces pulling in opposite directions.” While inflationary measures appeared to help the great agricultural sections make their mortgage payments easier, rising prices on farm products amounted to “a concealed tax upon the wages of labor and the salaries of professional groups and also an invisible levy upon the property of creditors.” Given their political and financial power, large creditors could “offset” these negative tendencies in the market. But uncontrolled inflation would only ruin middle-class property holders.41

For Matthews and Shallcross, the New Deal itself was neither fascist nor revolutionary, although the “spirit of economic orthodoxy” and economic fundamentalism that animated it was the “mainstay of fascism.” Its fascist character was evident in the limited recovery:

Recovery looks backward, not forward. It is not possible to recover a status which has not yet been reached. Even in the so-called days of prosperity in 1929 there were no less than seventy million Americans living below a standard of health and decency. So far as the overwhelming majority of the people of this country are concerned, the very suggestion that any past status in American history should be recovered for them is, to put it mildly, extremely cynical when the entire population might now enjoy the abundance made possible through technological progress.⁴²

The driving force of American fascism would not be a mass movement from below but would come from the actions taken by the ruling capitalists above. For sure, the lower middle class could be sucked into a movement if conditions worsened. But there were no signs of it on the horizon. “Reliable reports from all sections of the country,” Matthews and Shallcross wrote, “indicate a popular willingness to rely upon the conventional political processes of American capitalism to meet the demands of the crisis.”⁴³ Nor did the various shirt groups deserve the publicity they got. The same could not be said for the captains of industry and finance who, fretting over the “mild restrictions of the NRA,” yearned once more for the rugged individualism of laissez-faire. “The most extreme characterizations of the New Deal at Washington, whether fascist or socialist, have come from those financial masters of their political servants who desire the resuscitation of prostrate laissez-faire.”⁴⁴ These political servants exercised the “extraordinary powers” given to the executive branch under the New Deal. If the crisis deepened, fascist processes would take the capitalist democratic state to its logical extremes of

complete suppression of civil liberties and placing of all power in the hands of a chief executive. Capitalist parliamentarianism has then given way to fascist rule. When the hundred-day special session of Congress gave extraordinary powers of administration over agriculture, industry, transportation, banking, and the budget to the President, there was an ominous acclaim which overflowed Democratic bounds.45

But there was something far greater underlying the growth of executive power itself:

This tendency toward political dictatorship is accelerated by another factor which is not the product of an economic emergency, but which is itself productive of economic emergencies. This factor is the normal development of monopoly finance capitalism. The logic of advancing capitalism is the concentration of wealth in fewer and fewer hands or, even where there is an actual dispersion of ownership, a concentration of management over fewer and larger aggregates of wealth. This sets up a new tension between the propertied few and the propertyless many, more acute than is the case in earlier stages of capitalism. Inasmuch as the state is the reflection of property relations in society, it follows that there is a corresponding widening of the gap between the many who are reduced by their propertyless state to the category of political ineffectiveness within the capitalist democratic state, and the few who by reason of their enormous property holdings would control, at first covertly, then overtly, the real political power of that state.⁴⁶

Simply put, the increasing concentration of capital required a greater managerial state. Its “sharply rising curve” pointed to the eventual outcome of “complete dictatorship in both the economic and political fields.” Matthews and Shallcross defined fascism as the dictatorial rule of monopoly finance capitalism. To support their claim, they cited the landmark 1932 study by Adolf Berle and Gardiner Means, The Modern Corporation and Private Property, which showed that two hundred of the nation’s largest corporations run by scarcely more than 2,000 directors controlled “the conditions under which the whole of American industry must operate.” The powers vested in these corporations and the backing provided to them by the Roosevelt administration guaranteed that fascism was in the making. “Every assault upon labor’s right to bargain collectively or the corresponding right to strike is a movement in the direction of fascism,” they wrote. NRA leadership had repeatedly made open or implied threats to the basic rights of labor. Even Roosevelt was heard to speak in ways that signaled “compulsory class collaboration.”47

Matthews and Shallcross took another startling step by connecting the fascist trajectory of monopoly finance capitalism with political liberalism:

The idea of the corporative state is not always expressed with the bluntness that smacks of reaction; it is widely held by liberals who deny the basic fact of the class struggle by expounding a concept of society standing above the occupationally divergent groups within it—society whose claims are paramount over those of the classes of which it is composed. Liberals are amused or incensed, according to their individual tempers, at the suggestion that their analysis of capitalist society serves a fascist cause. But their belief that capital and labor may be joined in a wedlock which is productive of some general social welfare leads in a crisis to shotgun weddings such as have been performed in Italy and Germany with an irate lower middle class brandishing the weapon.48

Indeed, the preparation for American fascism clearly revealed the pivotal role played by liberalism, given “its refusal to recognize the class character of capitalist society—a character which involves an absolute irreconcilability of interests between two basic classes.”⁴⁹ They pointed to Roosevelt’s chief architect of the first hundred days, Rexford Tugwell, who “categorially rejects the Marxian concept of the class struggle.” Tugwell’s own book, Industrial Discipline, had revealed

his assumption that government in a capitalist society may be imbued with an essentially social aim that is inclusive, and may, therefore, in a grave emergency find it necessary to “compel or persuade a higher co-operation for a national purpose.”⁵⁰

From this they concluded of Tugwell’s position: “The analysis is liberal; the solution is essentially fascist.” The liberal’s road to fascism pointed to another unique characteristic:

The liberal differs somewhat from the rousing patriot in his nationalism, though not as fundamentally as might appear on the surface. In times of great emergency he joins hands with the uncritical patriot in demanding the unqualified loyalty of all to interests that are vital to few.⁵¹

This was a startling conclusion in a national magazine aimed at a wide middle-class readership. The suggestion that New Deal liberals were fueling the rise of American fascism pointed to a driving force of fascist processes that differed markedly from its Italian and German counterparts. Rather than rabid nationalism, efforts to save monopoly-finance capital from the threat of socialist revolution—perceived more than real—were now engineered by liberal reformers. Still, the coming of American fascism remained an open question. The Roosevelt administration had not “yet taken a decisive stand on the issue of economic nationalism,” despite the breakdown of the world market which forced other nations toward “an accentuated economic nationalism, or frantic efforts at national economic self-sufficiency.”52 Because this idea was growing in the United States, it pointed to a clear fascist trajectory.

George Sokolsky wrote about America’s drift toward fascism in The American Mercury, one of the most highly regarded literary magazines in the nation. Sokolsky made no bones that the whole New Deal was fascist. For one thing, it was a vast experiment guided by “no articulate philosophy” to save the capitalist system, but in the process aimed at sweeping aside capitalism itself.⁵³ The National Recovery Act and its administration was a fascist experiment. In order to save capitalism, Roosevelt moved the United States closer to fascism—but also at the expense of capitalism and the capitalist ethic. This, Sokolsky claimed, was evident in New Deal efforts to transform mass consciousness on the basis of democratic assumptions of equal opportunity and the individualist ethos of Calvinistic Puritanism aimed at capitalist gain. Skillfully, the government joined the spirit of capitalism to the “realism” of the New Deal, which also assumed class war as a constant feature of American society. To move forward democratically required government to intervene “from time to time, on behalf of one class or another.”⁵⁴ But this ethos, rooted in a romanticized view of democratic, small capitalism was anachronistic in an era in which the crisis of the system and the circumstances it created increased the need for a totalitarian form of government:

The Fascist state intervenes to protect the interests of the whole state when the Dictator, in his personal opinion, believes that such intervention is essential to the “welfare” of the state. The individual has no rights as an individual. He is a cog…. But the profit system continues and the individual capitalist might become very rich, if he does not disobey. The worker is given a lollipop or two, but in the main his misery continues as before.55

Although Roosevelt and his advisers lacked “a full Fascist philosophy,” their experiments aimed at saving the capitalist system were necessarily leading them to fascism.⁵⁶ To create a planned economy, especially on the basis of temporary measures, went against the long-held capitalist ethos that everything was grounded in the market. Antitrust laws were suspended so that the NRA had the power to create a balanced economy. But that power, Sokolsky argued, flowed from Roosevelt himself with ominous consequences:

The “permissive powers” granted the President centralize the planning in him, instead of in Congress, where under the Constitution it belongs. The type of planned economy which has thus far become apparent in Washington is as Fascistic as the planned economy in Italy.⁵⁷

Yet the character of the planning was “not capitalistic,” he insisted, “for in capitalism the individual alone must have freedom to determine his activities.” Rather, the NRA codes indicated a “Fascistic type of government management.” Fascism relied on the “Corporation” rather than the individual “to ensure the success of the managed society, the planned economy,” since under fascism “capital and labor function under a strict corporate law (the code) which only the Dictator can change at will.” But since American fascism was still embryonic, the “American capitalist”—the very individual who represented Sokolsky’s fulfillment of the American ethos—soon “discovered that the N.R.A. was a splendid arrangement for him.”⁵⁸

Writing from a Marxist perspective as part of a symposium sponsored by the journal Modern Monthly about the possibility of a fascist America, V. F. Calverton opened his contribution by describing fascism as a supreme irony of history:

Built upon the backs and shoulders of the little man, better known in America as the forgotten man, and supported by that little man through fire and sword, Fascism in every case has proved to be the economic boomerang which has swung back in its course and knocked out that little man before he has been able to catch his breath. In a word the little man has been paid by the big man to serve as an advance pall-bearer at his own funeral.59

For Calverton, American capitalist society was divided into three main groups: large-scale business in its corporate-monopoly form, the small businessman or family farmer, and the working man who lived by the wages paid primarily by corporations. While Big Business sought to expand its operations at the expense of small capitalists, workers suffered from starvation wages. The main economic conflict was not between large and small capitalists but between large capitalists and everyone below them. The question of whether or not America went fascist depended on the attitudes of the majority of small capitalists and workers. Since capitalism was surely in decline, it only remained to be seen if its replacement would be fascism led by big businessmen or communism led by workers. The second alternative was only possible if the small capitalist, or the “little man” as Calverton called him, who, “psychologically speaking,” was in far greater numbers in the United States than any other nation, joined the worker in the fight against fascism, or capitalist dictatorship. All this was evident in the NRA, which, without assuming a fascist guise, was doing the job that European fascism had set out to accomplish, namely the liquidation of the small businessman and dissolution of small business as an economic force. NRA codes were devised especially to aid Big Business in its struggle to dominate the market. In every occupation governed by the codes, Big Business leaders were able to determine the cost calculations and establish the minimum price that governs the operation of the industry, leaving the small businessman incapable of competing with their much greater counterparts. Elected by the forgotten man, Roosevelt was facilitating his extinction as a class and in so doing was achieving the same economic objectives that European fascism had accomplished by “more drastic and desperate methods.”60

WAS THERE A TRANSITION TO FASCISM?

If anything, the writers cited here indicated that the New Deal, if not full-blown fascism, indicated a definite trajectory and plausible transition to it. This was the Marxist position taken by Lewis Corey. In his great and still largely forgotten work, The Decline of American Capitalism, Corey implied that the New Deal represented the plausibility of a transition to fascism in the United States. His exhaustive analysis of “Niraism,” the term he invented to describe the philosophy and practical approach by the Roosevelt administration to reverse the decline and decay of U.S. monopoly state capitalism, could not succeed because it gave greater power only to monopolies, not the rest of society. The NRA marked an unprecedented intervention by the state into the private economy, not to advance technological development aimed at creating a planned economy of abundance, but rather, as Corey wrote, to preserve the decaying old structures through the “planned limitation of output.” This brought deliberate actions aimed at the repression of production and consumption, the limiting of technological progress, and the wasteful pouring of public money into corporate industry. Moreover, what had begun under the “reactionary” Hoover had advanced qualitatively under the “liberal” Roosevelt. In this respect, Roosevelt’s expansion of power in the first months of his presidency represented a tendency of monopoly state capitalism to merge industry and the state more thoroughly in order “to make more direct the control of the state by monopoly capitalism.”⁶¹

In this respect, the NRA made itself master of its own fate by creating “an apparatus for making higher profits,” the economic basis by which capital could then wage an even greater assault on the democratic rights of workers, preventing the latter from developing their own path to power. But in doing so, the Roosevelt administration pretentiously proposed a whole series of reforms that were impossible to achieve in full measure. For Corey, the culmination of state capitalism is the same as state monopoly capitalism—the New Deal was preparatory to fascism if the crisis intensified. “State capitalism,” he wrote, “limits reform to relief, represses the concrete democratic rights of the workers, and prepares their destruction by fascism.” Put more simply, without a revolutionary response of the working class toward socialist transition, state monopoly capitalism “becomes a transition to fascism.”62

The ruling capitalist class is a small oligarchy. Its rule needs a social base in wider mass support. As the oppressive weight of monopoly state capitalism thrusts the working class on to more aggressive action, other classes are set in motion by their own oppression. The farmers and middle class revolt. Fascism is an attempt to use the petty-bourgeois masses (including the agrarian) as the upper bourgeoisie has always done, in other forms, to act as a counter-revolutionary mass force. But these are essentially plebeian masses, the decline of capitalism presses mercilessly upon them, and they are desperate. So fascism masks its purposes with anti-capitalist and radical phrases. But the moment it comes to power fascism reveals itself as the dictatorship of monopoly capitalism.⁶³

A year later, R. Palme Dutt, a leading communist writer from India, clearly saw fascism developing in the United States. “The significance of the Roosevelt regime,” Dutt wrote in Fascism and Social Revolution, “is above all the significance of the transition to Fascist forms, especially in the economic and industrial field.” Dutt emphasized that the United States was transitioning toward fascism and in no way was the process complete, but it was definitely moving in that direction:

As the failure of the plans of economic recovery becomes manifest and gives place to new forms of crisis and widespread mass discontent, and above all as the advance to war implicit in the whole Roosevelt policy develops, the demand for corresponding political forms of Fascism will inevitably come to the front in the United States.64

The same assessment was provided in the report given by the General Secretary of the Communist International, Georgi Dimitroff, to its Seventh World Congress in 1935. Dimitroff reported that “in a more or less developed form, fascist tendencies and the germs of a fascist movement are to be found almost everywhere.”⁶⁵ His definition of fascism as “the open terrorist dictatorship of the most reactionary, most chauvinistic and most imperialist elements of finance capital” only applied to those capitalist states where fascism had come to power. For Dimitroff, the “German type” set the benchmark. The Hitler regime exhibited “bestial chauvinism” and “a government system of political gangsterism.” This made it “the spearhead of international counter-revolution” and the “chief instigator of imperialist war.” Of course, he also made sure to add that this most virulent form of fascism was driven by its “crusade” against the Soviet Union, “the great fatherland of the toilers of the whole world.” Thus, fascism should be considered neither a form of state power “standing above” the bourgeoisie and the proletariat, nor “the revolt of the petty bourgeoisie which has captured the machinery of state.” On the contrary, “fascism is the power of finance capital itself.”⁶⁶

As for the United States, Dimitroff said that its people had to consider “key questions” in order to do their part in building the fight against fascism at home and abroad. Roosevelt’s program for recovery had “collapsed,” and Americans were beginning “to abandon the bourgeois parties and are at present at the crossroads.” If America went the way of Germany, the world would face an even greater menace than National Socialism:

Embryo American fascism is trying to direct the disillusionment and discontent of these masses into reactionary fascist channels. It is a peculiarity of the development of American fascism that at the present stage this fascism comes forward principally in the guise of an opposition to fascism, which it accuses of being an “un-American” tendency imported from abroad. In contradistinction to German fascism, which acts under anti-constitutional slogans, American fascism tries to portray itself as the custodian of the Constitution and “American democracy.” It does not yet represent a directly menacing force. But if it succeeds in penetrating to the wide masses who have become disillusioned with the old bourgeois parties it may become a serious menace in the very near future.

And what would the success of fascism in the United States involve? For the mass of working people it would, of course, involve the unrestrained strengthening of the regime of exploitation and the destruction of the working-class movement. And what would be the international significance of this success of fascism? As we know, the United States is not Hungary, or Finland, or Bulgaria, or Latvia. The success of fascism in the United States would vitally change the whole international situation.67

STATE MONOPOLY CAPITALISM, THE NEW DEAL, AND EMBRYONIC FASCISM

The New Deal failed to lift the country out of the Great Depression. Though it saved the banking and financial system from collapse and sought to restrict production in order to push up prices and income to increase consumption, it failed to sustain recovery and solve the problem of unemployment. The New Deal saved Wall Street until wartime production and the waging of war itself finally saved Main Street. The historical record is clear. The volume of real GNP did not reach 1929 levels until 1939. Unemployment, which peaked at almost 25 percent in 1933, averaged nearly 19 percent from 1931 through 1940. As one historian of the U.S. economy concluded, “The anemic nature of the recovery during the 1930s was a direct result of the inadequate increases in government support for the economy … [as] the total public-sector deficit averaged only 2.5 percent of the GNP in 1934–37.”68

American journalists and writers echoed Marxist theoreticians in their belief that the New Deal had definite fascist tendencies. To save capitalism from collapse, the Roosevelt administration had propped up Big Business, which itself had become a system of power in its own right. The contradictions of liberal capitalist democracy were also reflected in the warp and woof of liberalism in the 1920s and 1930s that made it inherently contradictory and reduced a once viable political doctrine to folklore. Put another way, these contradictions, which appeared first in a boom and then in the bust, determined the strange and somewhat confusing history of American liberalism. What was unmistakable in the assessments of these writers was that liberalism indeed played a formative role in the making of American fascism.

Lewis Corey presciently saw this in 1934. The attempt to solve the general crisis of the Great Depression required a new round of capitalist accumulation that could only be attained by a resurgent imperialism. Herein lay the inevitable crisis of state monopoly capitalism, which for Corey held the plausibility of American fascism. That it did not come to pass was due to global contingencies that brought fascism to power elsewhere, a menace to the world that America later fought in the name of anti-fascism, which Roosevelt declared in December 1940 as the “Great Arsenal of Democracy.”