25218949666_1f7e878b48_c.jpgEconomy Elections & Institutions Polarizing Political Economy 

This is Not Fascism

By James H. Nolt

The Economist is taking up a debate introduced by conservative military historian Robert Kagan about whether Donald Trump is a fascist. Like most political debates, this one is entirely devoid of analysis based on political economy. Trump’s path to the Republican presidential nomination has little in common with classic fascism. Whether or not he veers toward fascism in his personal beliefs, he has no paramilitary organization and consequently no chance to seize power outside legal governmental processes.

If Hillary Clinton loses this election to Trump, his power will be seriously constrained by broad bipartisan opposition in Congress and significant resistance and subversion from large segments of internationalist business that are not thrilled by his campaign. My own view is that Clinton is unlikely to lose, but although she is the obvious choice of much of the business establishment in both parties, she is such an uninspiring and lackluster campaigner there is a chance she could bungle badly enough to enable Trump to prevail among angry and insecure voters.

Voter anger and disgust with Beltway politics is the one element of Trump’s campaign that echoes fascism. All fascist movements fed on widespread disgust with politics as usual: corruption, venality, and deadlock. The Republican Party in particular has been anti-Washington. This rebounds to the party’s advantage at election time as it appeals to many disgruntled and anxious voters. Unfortunately, it is a poor recipe for governing. Almost anything constructive the Republican Party could do in power is bad-mouthed by the conservative chorus in the wings. Thus, much more than the Democrats, Republicans are increasingly taught to hate or at least mistrust their leaders. This is not very congenial with the fascist adulation of The Leader.

The anti-government revolt has promoted inertia and gridlock that seem to invite a strongman or bully able to force cooperation with determined will. This fascist theme makes for good superhero movie trailers, but it has nothing to do with real politics, where countervailing powers must be accommodated through coalition building while isolating recalcitrant opposition. Mao Zedong summed this up simply by saying that in politics, one must, “Unite true friends; oppose real enemies.”

Much that Trump promises to placate voters will not be possible. Voters like to believe that a brash and determined man can prevail over the lazy and corrupt, but actually there are quite a few very smart and hardworking people, corporations, and institutions that will be fighting Trump on many of his core proposals. If he can win, he will likely be a one-term president with a record of frustrating failure.

Some establishment Republicans now reluctantly endorsing Trump may be thinking the same thing. He can deliver some things on which Republicans broadly agree, such as conservative Supreme Court nominees. However, on key “protectionist” issues that appeal to insecure voters, Trump cannot deliver. He rails against immigrants and foreign trade competition, but neither Congress nor the bulk of the American business establishment will give way on these issues.

Even without Congressional authorization, Trump could order administrative measures to arrest and deport millions of illegal immigrants simply by enforcing existing law. In reality he cannot do that, however, because it would cripple large segments of agricultural, construction, and manufacturing business now dependent on immigrant labor. Few Americans are willing to take the jobs that would be vacated by departing immigrants, so manufacturing would just accelerate its migration overseas if Trump were to implement his promised deportations.

Trump claims he would keep American businesses from shipping jobs abroad, but that would not be within his power as president. Existing laws and treaties provide a largely free-trade environment. He could not reverse this without the support of Congress. Hardcore protectionists are now a distinct minority in Congress because the multinational businesses that put up most of the money for political campaigns have ensured that free-trade orthodoxy largely prevails in both parties, whether or not voters approve. At most Trump could stall new trade treaties, but he could not void existing laws.

Trump claims he would threaten high tariffs against China and Mexico to induce greater cooperation from them (even to force Mexico to pay for his famous wall). He could direct the Department of Commerce to bend over backward to favor American companies that demand countervailing protection in the face of competition from abroad. The legal process requires that a company claims harm. Workers have no standing. If the company is profiting from importing cheaper products from abroad, it is not likely to cooperate. Trump as president would have no power to impose such tariffs unilaterally. Trump would find blanket protectionism impossible within the framework of existing trade law. Additionally, he will not find a majority in Congress for making trade law significantly more protectionist.

Trump’s common refrain against China and other major trade partners is that they compete so effectively because of “currency manipulation.” I have addressed this in a previous blog. This charge has limited merit, but whether he is right or wrong about the cause of trade distress, Trump would lack the power to redress it.

The power to affect the value of the U.S. dollar is dispersed across the entire world financial system. Its value is affected by the relative extension of credit worldwide. Myriad decisions made by private creditors to extend or withdraw credit within and across various national boundaries influence currency values. Government central banks can be players in the process, but they are not overwhelmingly powerful, since all effects are relative to what everyone else is doing. The U.S. Federal Reserve (Fed) is charged with maintaining a steady value of the U.S. dollar, but actually has fairly limited power to do so.

Furthermore, the president does not control the Fed. The new president will appoint a chairman of the Federal Reserve Board, but most of the board members have 14-year terms. The holdovers come from banking backgrounds where maintaining a strong and stable dollar value is considered responsible. They are not likely to bend to Trump’s desire for a weaker currency, since, as I mentioned previously, this devalues all existing dollar-denominated debt assets, a massive pool of financial wealth.

A further irony of labeling Trump a fascist is that classical fascists, such as Mussolini in Italy, were not in favor of high tariffs or devalued currency. Fascist Italy did not weaken its currency to promote trade, as Trump advocates. Instead, it maintained an overvalued convertible gold lira longer than major powers like Britain, Japan, and Germany in the face of the Great Depression. Bond holders and large competitive internationalist firms like Fiat thrived under the fascist order.

On the other hand, both Trump’s blaming of foreigners for America’s economic woes and his solutions to these problems, including protectionism and deportations, are much more like the political economy of Nazi Germany. Whereas all the establishment German parties upheld the convertible gold mark, thereby securing Germany’s credit at the cost of massive Depression-induced job losses, the Nazis imposed exchange controls that cut off the German economy from free exchange with the rest of the world, effectively boosting employment in Germany with massive credit-induced growth once the national economy was more isolated. Trump as president, however, would lack the variety of economic levers that Hitler controlled in Germany.



James H. Nolt is a senior fellow at World Policy Institute and an adjunct associate professor at New York University.

[Photo courtesy of Gage Skidmore]

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