Conservatism Leads to Fascism

by Benjamin Studebaker

With a provocative title like this one, it’s best to get clear immediately not on what this piece is but on what it is not–I am not going to claim that there is really no difference between conservatives and fascists, or that conservatives are secret fascists, or in any way imply that if you are conservative you in any way shape or form an advocate for any of the policies of Adolf Hiter, Benito Mussolini, or like figures. What I wish to argue in this piece is that conservative economic policies generate conditions that favor the rise of extreme-right fascist parties and that economic conservatism indirectly and unintentionally increases the risk that fascist states will arise.

The argument proceeds as follows:

  1. High wealth inequality increases the chance that liberal democracies will collapse into fascist states.
  2. Conservative economic policy promotes (whether by design or by happenstance) high wealth inequality.
  3. Therefore, conservative economic policy contributes to an environment in which fascist states have the opportunity to supplant existing liberal democracies.

If #1 and #2 are both true, #3 follows, so my task is to establish #1 and #2.

Wealth Inequality Leads to Fascism

Political scientist Carles Boix took some data on the number and percentage of the world’s countries that have been democracies from 1800-2000:

The line shows the percentage of the countries that were democratic, the bars show the raw number. The data shows that democracy really starts to take off as a system of government in around 1848–a year known in some European countries as the “Spring of Nations” (and which gives the “Arab Spring” movements their name in the western world). From 1848 on, democratization has been the running theme, hence the widespread belief that democracy is in the process of spreading everywhere. However, there are two periods in which the percentage of democracies falls sharply:

  1. The Interwar Period (1918-1945)
  2. African Decolonization & Cold War Coups (mostly 1956-1968)

There’s a vast difference in significance between these two periods. In the decolonization case, stable democracies do not all of the sudden collapse. New countries are created that overwhelmingly fall into dictatorship due the wide array of problems that gripped Africa following the imperialist exit. We can see this in the data–the total number of democracies remains relatively stable during the 56′-68′ period, but the percentage falls as new authoritarian states in Africa are created out of the old European empires. We also have lots of Cold War activity as the US and USSR compete for control of the new countries. This skews the data in the third world, as the international security competition between the US and USSR comes to play a larger role in determining what kinds of governments will exist in poor countries that does the inclinations of the various peoples who inhabit those countries.

Of far greater interest is the interwar period, in which the total number of independent states remains mostly constant yet the number of democracies falls precipitously. Why do so many advanced states turn to authoritarianism during the interwar period? Thanks to Picketty and Saez, we know that inequality was quite high on both the North American and European sides of the Atlantic during this period:

This inequality plays a tremendous role in triggering the depression because it leads to both underconsumption and overinvestment. As inequality rises, more of the available funds go to affluent investors while wages become a smaller portion of the economic pie. Consumers see their purchasing power stagnate; they become unable to absorb additional production. As a result, suppliers run out of markets to expand into. Increasing supply further only depresses prices or yields surplus goods that go to waste sitting on shelves. Companies, who borrowed money on the expectation that their sales would continue to grow, suddenly find themselves unable to pay their creditors, many of whom were in turn indebted to others. These companies all simultaneously come to the conclusion that they need to avoid going broke by reducing this costs, so they fire vast numbers of people, increasing unemployment and driving consumption even further down, damaging their sales figures even more. This swiftly becomes a vicious cycle that destroys vast amounts of wealth and lives. We can get a rough estimate on wage share data in the United States in the 1920’s by looking at tax returns (the Federal Reserve doesn’t start tracking the wage share independently until after WWII). Those numbers sync up with this story:

Contrary to popular belief, hyperinflation in Weimar Germany was a phenomenon of the early 1920’s and was resolved by the middle of that decade. In the run-up to Hitler’s takeover in 1933, it is unemployment driven by inequality, not inflation, that plays the decisive role, and it is Hitler’s ability to drive down the unemployment rate (by throwing vast sums of government money at re-arming Germany via militarized Keynesianism) that allows him to gain the loyalty of the German people:

Before I move on, I’d like to tackle a counterargument we sometimes hear. Now and then people make what I call the “bread and circuses” claim. This argument alleges that inequality is not a threat to democracy because people are not interested in their relative wealth but only in their absolute wealth, and that if a country manages to achieve a minimum threshold of output for its citizens (typically $10,000 per capita GDP is the chosen figure), it is extremely unlikely that democracy will collapse. People are able to make this argument in large part because no country–not even the United States–passed $10,000 in per capita GDP until World War II:

Since inequality in rich countries was, until only very recently, far below pre-war levels, an examination of countries with $10,000+ per capita GDP restricts the data set to the post-war world and consequently ignores the only major period in which substantial numbers of relatively advanced democracies collapsed during the past 200 years. Further doubt is cast on this argument by recent comparative political science research, which claims that the correlation, once isolated, proves spurious. If there are conditions under which democracies can collapse, they are the conditions that prevailed in the interwar period–persistently high inequality and consequently persistently high unemployment.

Conservatism Causes Wealth Inequality

Economic conservatives come in two varieties:

  1. Wet–Burkean conservatives who are generally skeptical of major policy changes in any given direction.
  2. Dry–neoliberal conservatives who wish to rollback the redistribution and regulatory policies enacted in the aftermath of the depression.

The dries are the bigger problem for our purposes here, but in a world in which extensive Keynesian reforms are necessary to correct heightened inequality and unemployment, the wets can be a serious problem as well.

It is fairly easy to establish that dry conservatism yields inequality. The Republican Party in the United States is wholly dominated by the dries who have set about dismantling Keynesian constraints on the free market beginning in the early 70’s and accelerating from the 80’s onward. Research conducted by Larry Bartels on changes in inequality experienced in the United States from 1945-2005 under democratic and republican presidents yields a surprisingly large difference in the trajectory depending upon who rules the roost in the executive branch:

This graph shows what would have happened, based on the averages, if either the democrats or republicans had run the white house exclusively, with the dotted line in the middle indicating the actual rate at which inequality has changed during the period. Effectively, what this indicates is that the democrats are wets–under democrats, inequality remains essentially stagnant and the status quo prevails. So what we see in the American case is a party of dry conservatives (the republicans) that rollback Keynesianism and increase inequality, and a party of wet conservatives (the democrats) who keep things more or less the way they are. Neither party is committed to reducing inequality or to actively reversing the increase. In this way, both kinds of conservatism contribute to the growing inequality problem. The dries, by worsening it, and the wets, by doing too little about it. In this way conservative economic policies are slowly moving developed countries toward the kind of inequality conditions last experienced in the 20’s and 30’s, and thereby increasing the chance that democratic governments will collapse in favor of authoritarian regimes.

Non-democratic political theory has made few strides since the interwar period, so if our democratic states do collapse, it is highly unlikely at this time that the new regimes will be benevolent forces. Fortunately enough of the Keynesian architecture remained in place in 2008 to prevent unemployment from soaring up near 30% in most affluent states, though there have been exceptions. The Spanish unemployment rate remains up near Weimar Germany territory:

Meanwhile, Hungary has already taken the authoritarian plunge. The rich and powerful democracies in the United States and Western Europe avoided the worst of the last crisis, but if they continue to dismantle their regulatory and redistributive infrastructures, fascism may once again resurface in a big way, to the detriment of us all.