As we go Marching

The roots of Italian fascism…as a case study for modern governments facing (or, taking advantage of) tough economic times. This DR classique, originally published in September of 2003, explains it all.

"The mind thus turned loose, thus emancipated from facts, took unexpected directions…"
– John T. Flynn

"One of the funny things about the situation…" Alexander Chancellor began a sentence, speaking of the war in Iraq, "is the way the Germans have come through this…

"They took the same position as the French – they didn’t want to get involved. But the American press focused on the French as traitors and cowards…and hardly mentioned the Germans."

The Germans occupy a special place in recent world history.

"Give a German a gun and he heads for France," was a common expression in the last century.

"The Hun is either at your throat or at your feet," was another.

People wondered what it was about the Germans that had made them so ready to go to war…and so willing to go along with ghastly deeds on a national scale. Was it something in their blood, in their culture…or in their water?

Now, of course, the Hun has been tamed; the Kraut has become a pacifist. America urges him to join the war against Iraq, but he demurs; he has had his fill of war.

And so the question is more puzzling than ever. Has his blood changed? his Kultur? or his economy?

We raise the question after beginning a marvelous little book by John T. Flynn, "As We Go Marching," written during World War II.

The Origins of Fascism: The Circumstances of Its Development

Flynn argues that fascism had no particular connection to the Germans themselves…nor was there anything in the Teuton spirit that made them especially susceptible. Instead, he points out that the creed was largely developed by an Italian opportunist, Benito Mussolini. It was the fat Italian who figured out the main parts – including the glorious theatrical elements. The Germans merely added their own corruptions and attached a peculiarly vicious policy of persecuting, and later exterminating Jews.

But it is Flynn’s description of the economic circumstances in Italy in the late 19th and early 20th centuries – the fertile soil in which fascism took root and flourished – that caught our attention.

Italy went to war in September of 1911, against Turkey. The war was over 12 months later and soon forgotten by everyone. But the impulse that drove the Italians to war in the first place…and led to their next move…was the focus of Flynn’s attention:

"The vengeance of the Italian spirit upon Fate was not appeased. Instead, the appetite for glory was whetted. And once more glory did its work upon the budget. But once more peace – dreadful and realistic peace – peace the bill collector, heavy with her old problems – was back in Rome. The deficits were larger. The debt was greater…the various economic planners were more relentless than ever in their determination to subject the capitalist system to control."

Perhaps they should have lowered interest rates, or pressured China to raise its currency. Any policy initiative, no matter how absurd, could be considered. As Flynn puts it: "Out of Italy [as out of America currently] had gone definitely any important party committed to the theory that the economic system should be free."

Italy had dug herself into a deep hole of debt. Between 1859 – when the centralized Italian state came into being – and 1925, the government ran deficits more than twice as often as it ran surpluses. Politicians, who depended upon giving away other people’s money, found themselves with little left to give away.

"All the old evils were growing in malignance," writes Flynn. "The national debt was rising ominously. The army, navy, and social services were absorbing half the revenues of the nation. Italy was the most heavily taxed nation in proportion to her wealth in Europe."

Of course, there followed many episodes of financial risorgimento and many pledges to put the books in order. None of it stuck for long. Italian politicians were soon making promises again.

The Origins of Fascism: Debt and Resistance Creep Higher

When grand promises must be fulfilled, debt creeps higher…and so does the resistance of taxpayers and lenders, especially from conservative groups.

"Hence it becomes increasingly difficult to go on spending in the presence of persisting deficits and rising debt," writes Flynn. "Some form of spending must be found that will command the support of conservative groups. Political leaders, embarrassed by their subsidies to the poor, soon learned that one of the easiest ways to spend money is on military establishments and armaments, because it commands the support of the groups most opposed to spending."

Military spending gives an economy the false impression of growth and prosperity. People are put to work building expensive military hardware. Assembly lines roll and smoke stacks smoke. Plus, the spending goes into the domestic economy. Americans, for example, may buy their gee-gaws from China, but their tanks are homemade.

Military adventures not only seem to stimulate the domestic economy; they also goose up popular support for government. Soon, "it was a time for greatness…" as Flynn describes the approach of war. War, Giovanni Papini raved, was "the great anvil of fire and blood on which strong peoples are hammered."

The romantic appeal of war, the political pull of military spending, the economic delusion, and the polished brass and boots…it was all too much to resist. Despite a disastrous experience in WWI, under Mussolini’s leadership, even the fun-loving Italians were soon marching around like popinjays and getting out maps of Abysinnia.

Even Americans were impressed. "He is something new and vital in the sluggish old veins of European politics," said Sol Bloom, then chairman of the House Foreign Relations Committee in 1926. "It will be a great thing not only for Italy but for all of us if he succeeds."

In investments, as in war, an early defeat is often more rewarding than a later one. Fortunately for the Italians, the African campaign was a fiasco. In a few years, Mussolini was hanging from a meat hook and Italians went back to making shoes, handbags and pasta.


Bill Bonner
The Daily Reckoning

September 23, 2005

P.S. Mussolini was the perfect fascist. Like America’s leading neo-cons, he was really a leftist…who saw an opportunity. And also like America’s neo-cons, he was an admirer of Machiavelli, who believed that the ruler "must suppose all men bad and exploit the evil qualities in their nature whenever suitable occasion offers."

Flynn’s book, As We Go Marching, provided Bill with good fodder for he and Addison Wiggin’s newest book, Empire of Debt. The book won’t be out for another month, so in the meantime, check out their first Wall Street Journal bestseller, Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

We are cut off from the news down here. But that doesn’t mean we’ve gone dark.
No…we were thinking more about the essentials.

When will stocks crash? Will interests go up or down? How long can the bubble in real estate last? We don’t know the answers. We have to return to the rules…the basics…the fundamentals for guidance.

We don’t have access to tomorrow’s headlines. All we can do is to look hard at the present and the past. What we are always trying to understand is the essential nature of the thing. If it is a stock, what is it really worth? What is the business? How does it work? How will it make me money? If it is a house, is it really somewhere I would want to live? What would it be worth to me?

Of course, most people don’t care about the essentials; all they’re interested in is the gas. Here’s a stock that’s really been going up, they say. A house down the block sold for 20% more. Everybody’s going into China now; I don’t want to miss out!

As we write, people are panicking into houses. They’re afraid that if they miss this big run-up, they’ll have to live in a rented apartment forever. Their wives will run off with their personal trainers, who wisely bought in the ’90s and traded up.

What is the essential value of the house? Who bothers to ask?

We’ve been wondering how our creed applies to larger questions. If you can identify the essential nature of a trend or an animal you can make a decent guess about what it will do. If you see a four-legged animal standing by a fence, it makes a big difference if it is a cow or a lion. The cow will continue eating the grass; the lion may eat you.

That is why we think it is so important to understand that America is an empire. The essential nature of an empire is much different from that of a normal country. It really doesn’t matter what people think or what they want; they might as well be Christians trying to reason with the wild beasts in the coliseum. Fish gotta swim. Birds gotta fly. An empire has to be imperial.

There is no room for humility or prudence in an empire. When the president says we will spend "whatever it takes" to rebuild New Orleans, for example, he is merely being imperial. He says also that the country will do whatever it takes to turn Iraq into the nation it wants it to be. ‘Whatever it takes’ is a lot more than the federal government has. The money doesn’t magically appear; it must be taken from citizens everywhere, who certainly had their own plans for it.

But in the modern empire, Rome…we mean Washington…is expected to meet every crisis – foreign and domestic. The mob demands it. An empire mobilizes the lowest sentiments of the masses for militaryglory… bread… circuses…someone else’s money… until there is none left. The virtues of the old disappear while the central authority constantly pushes the frontiers, stretching its power, straining its resources, strutting around until it finally falls on its face.

More from our friends at The Rude Awakening:


Lee Harrison, reporting from Ireland…

"The description of the Nicaraguan coastline reminds your junior editor of life back home; surfing, golfing and great take-out…only, it’s a fraction of the cost."


Bill Bonner, back in Buenos Aires:

*** "I was down here in the ’80s," said an old friend last night. We were dining at a restaurant called El Mirasol. Argentina is famous for its beef. We had some of best meat we have ever had at El Mirasol. Make sure you try the sausage and the tenderloin.

"Back then," he continued, "this must have been one of the most expensive cities in the world. That’s the way it is down here: Up and down, up and down. It has sharp cycles. Sometimes it is very cheap. Sometimes it is very expensive. A couple of years ago it was very expensive. You could have bought some of the best apartments in town for $200,000 or so. Now, they’re twice as much…but probably still pretty cheap compared to other places."

We are down here to look at real estate. Your editor hates to buy things he can’t see and feel. He sticks with the basics…the essentials. Trouble is, property is too expensive in most parts of the world. We have come down here in the hope of finding some that is not. More to come…

*** "You know," our friend went on, after a few bottles of Malbec, an Argentine wine, "I have a lot more money now than I used to. But I’m no happier now than I was when I didn’t have a penny. Of course, back then, I was young."

Yes, that is the way is seems to work. Nature gives, but she takes away.

Then, turning to a young man at our table…

"Hey, how come you’re rich and young? It doesn’t seem fair. You’ve got it all: A pretty wife, money, freedom. It doesn’t seem fair."

"Don’t worry," came the reply. "I’m just waiting to regress to the mean…"

The Daily Reckoning