Corporate State and the N.R.A.
For over two years the people of the United States have been collaborating with President Roosevelt in his effort to solve American economic and social difficulties. They are aware that the President is concerned not with immediate economic reconstruction only, but with lasting social and economic reform as well. This is why I believe that the American people are in a particularly favorable position to understand the efforts of Premier Mussolini to solve urgent economic problems in Italy and to establish at the same time a new and improved social and economic system.
Fascism came to power in Italy in a moment of profound and violent friction between capital and labor. The conflict threatened not only the country's economic stability but also its political stability. Radical organizations, especially those of the socialists, had obtained a strong hold over the laboring classes and were beginning to give the struggle for economic advancement a decidedly political turn. In addition to the serious economic losses caused by an ever-increasing number of strikes and lock-outs, there was imminent danger of a complete transformation of the political bases of the whole structure of the Italian state. It was primarily to meet and deal with this danger that the fascist movement arose.
Anyone familiar with the history of Europe knows that the associative tendency in human nature has been influenced by two fundamentally opposite forces. There is on the one hand a tendency to combine with other men of similar occupation, either for purposes of protection or achievement. But on the other there is a tendency toward emancipation from these occupational groups and consequently toward individual freedom (as when the French Revolution overthrew the medieval corporations and proclaimed the freedom of labor).
But the new freedom could not thrive within the narrow geographical limits of European countries. Even today there is an enormous difference between the flexible political and social structure of the United States, a country of vast open spaces, and the comparative rigidity of the political and social framework of Europe. The difference lies in the possibility of economic initiative offered to men by the territory which is America and the territory which is Europe. In the United States, social conflicts have arisen primarily from questions of production. Americans have always sought guarantees for individual economic initiative. In Europe, social conflicts have for centuries revolved around the question of the distribution of wealth. Europeans, confined in limited territories, have found rigid organization by occupation or economic groups a valuable means of solving the problems involved in the distribution of wages and profits.
The difference in the two historical processes has been acutely expressed by President Roosevelt in his book "Looking Forward":
The growth of the national governments of Europe was a struggle for the development of a centralized force in the nation, strong enough to impose peace upon ruling barons. In many instances the victory of the central government, the creation of a strong central government, was a haven of refuge to the individual. The people preferred the great master far away to the exploitation and cruelty of the smaller master near at hand.
But the creators of national government were perforce ruthless men. They were often cruel in their methods, though they did strive steadily toward something that society needed and very much wanted -- a strong central State, able to keep the peace, to stamp out civil war, to put the unruly nobleman in his place and to permit the bulk of individuals to live safely.
The man of ruthless force had his place in developing a pioneer country, just as he did in fixing the power of the central government in the development of the nations. Society paid him well for his services toward its development. When the development among the nations of Europe, however, had been completed, ambition and ruthlessness, having served its term, tended to overstep the mark.
There now came a growing feeling that government was conducted for the benefit of the few who thrived unduly at the expense of all. The people sought a balancing -- a limiting force. Gradually there came through town councils, trade guilds, national parliaments, by constitutions and popular participation and control, limitations on arbitrary power.
After reminding the reader of the decisive duel between Jefferson and Hamilton, between centralism and individualism, President Roosevelt finds in the economic conditions peculiar to the United States the causes for the victory and subsequent development of American economic and political individualism. He continues:
So began, in American political life, the new day, the day of the individual against the system, the day in which individualism was made the great watchword in American life. The happiest of economic conditions made that day long and splendid. On the Western frontier land was substantially free. No one who did not shirk the task of earning a living was entirely without opportunity to do so. Depressions could, and did, come and go; but they could not alter the fundamental fact that most of the people lived partly by selling their labor and partly by extracting their livelihood from the soil, so that starvation and dislocation were practically impossible. At the very worst there was always the possibility of climbing into a covered wagon and moving West, where the untilled prairies afforded a haven for men to whom the East did not provide a place.
The social consequences of this environmental difference are reflected in the attitude of the two peoples toward the state. The American citizen has always lived at a distance from his government and instinctively holds aloof from it. The European, by contrast, has always viewed the state as the source of power, security and right. On every institution that the European creates he instinctively desires the seal of state approval. It is demanded by his temperament, his conception of the state's function, his age-old tradition of discipline. This is the historical setting in which Italian corporativism must be interpreted.
In accordance with the dictates of nature on the two continents, the prevailing social trend in the United States has been toward a grouping with a view to production, e.g., trusts, with all the familiar consequences of struggle between vertical blocks; while in Europe the trend has been toward a grouping with a view to the distribution of wealth. Consequently in Europe there has been a separation of the principal elements in production, capital and labor, into two hostile social strata, and a resulting horizontal struggle of classes.
It was only natural, then, that when the wastage of energies in class conflict increased in the period after the war, social reconstruction should have started in Italy with an attempt to reconcile capital and labor in the interests of the nation as a whole, and that we should then proceed, on the basis of that reconciliation, to a new economic organization in a corporative form. And it was just as natural that, in similar circumstances, the United States should have begun by establishing "codes of fair competition" between producers in a given branch of industry, including in those codes definite provisions for regulating the relations between labor and employer organizations and the conditions of work (section 7a of the N.R.A.), and establishing a new form of cooperation amounting almost to a system of self-government in industry. The two tendencies may be described in terms which show the difference in method but the similarity in substance -- in Italy, "cooperation of classes;" in the United States, "cooperation in industry."
Many of the fundamental principles on which the economic solution gradually evolved by fascism was to rest are to be found in the laws of April 3, 1926, concerning legal control over labor and production, and in the "Charter of Labor" published April 21, 1927. The first of these laws contained several fundamental provisions:
1. Full legal recognition by the state of those associations of employers, workers, professional men and artists which are designed to safeguard the interests of their members and which are in a position to sign contracts binding upon those members.
2. Equality before the law of employer organizations and labor unions.
3. The establishment of labor courts with power to settle labor disputes affecting either individuals or groups.
4. The prohibition, with penalties, of strikes and lockouts.
In application of the first principle, fascism decided to establish within every major occupational group one legally recognized syndical organization. Each of these syndicates was given prerogatives. It had exclusive supervision over the interests of the whole occupational group in question, and was made its official mouthpiece. It had the exclusive right to regulate, by collective contracts, the labor relationships of all members of that group. It had the right to impose syndical contributions. It had the right to appoint delegates whenever representation was required. And it had the right, accorded at a later date, to recommend to the Grand Council of Fascism candidates for the new Chamber of Deputies.
But before it was legally recognized and vested with these powers the group had to fulfill certain requirements. I shall specify the more important qualifications. A syndicate of wage-earners must have a membership of at least 10 percent of all workers in that occupational group. A syndicate of employers must be composed of members who employ at least 10 percent of the wage-earners in that group. To be recognized, a syndicate must have a social program for the welfare of its members (relief, technical education in the trade or branch of production, and moral and national education). Lastly, a syndicate's officers must be competent, must be of good moral character, and must be trustworthy in matters of national doctrine.
Syndicalism was thus definitely stripped of the last remnants of those anti-national and international political influences which in the past had tended to lead it astray. It was ready to carry on a definite and well-defined function within the orbit of the national fascist state.
The law of 1926 established the foundations for a rational organization of Italian producers. It divided them into the following groups: agriculture, industry, commerce, credit and insurance, and the professions and arts. At the top of each, with the exception of the last, are two central syndical Organizations called "confederations," through which laborers and employers find separate representation. In the field of the professions and the arts there is, naturally, only one confederation. Consequently, heading the Italian syndical structure there are nine national confederations, one representing the laborers and one representing the employers within each of the four fields of agriculture, industry, commerce, and credit and insurance, plus a ninth confederation representing professional men and artists. The numerical strength of these organizations may be indicated by a few statistics. In 1929 there were 4,334,291 Italian employers represented by employers' confederations, 1,193,091 of them actually members of those confederations. In 1933 there were 4,151,794 employers, 1,310,655 of them actually members. As for the laborers, in 1929 there were 8,192,548 workmen represented by four confederations, 3,193,005 of them actually members of those confederations. In 1933 there were 7,019,383 represented workmen, 4,475,256 of them actually members.
A confederation is sub-divided into national federations, each of which represents more directly the various kinds of activity that are involved in the given field of production. They are exceedingly numerous.
The confederation in which the various federations participate functions only as coordinator and supervisor in matters which are of common interest to all the federations established within its particular branch of national production. The federations extend their influence over the whole of the national territory through local syndicates which are subordinated to them. In this way each and every branch of production in Italy becomes a part of a legally constituted national organization, though individual members of a given occupational group are free to choose whether or not they wish to enroll in the appropriate organization.
With the full support of the great majority of employers and workers, the syndicates have done valuable work in developing the moral and economic interests of the people they represent. Their activity has covered the fields of social assistance, technical and general education, the perfection of methods of production and reducing costs, and the contractual regulation of labor relations. By disposing of the wage question, the syndicates played an important role in stabilizing Italian economy on the 90 percent normal basis. Thus within the nine short years since it was initiated in 1926 the syndical system has spontaneously responded to the needs of the Italian people and has fully realized their expectations.
But Italian fascism did not confine its program of reform to the abolition of open conflict between economic classes and groups. It was not enough to suppress strikes and lockouts, to give legal personality, and therefore political responsibility, to occupational associations. These steps taken by themselves represented liquidation of the past rather than preparation for the future. They were soon to be carried much further. Fascist syndicalism was to become more than a mere method of organization. It was to become a vital system destined to represent an active force within a new national society.
The fascist state admitted to full citizenship -- on a par with such traditional units as the individual, the family and the town -- the syndicate, which like the family and town embraces and supplements the individual. Through this new medium the individual can realize the true self-determination which is synonymous with liberty.
The great achievement of fascism, therefore, is to have clarified interests and to have harmonized them with those of the state. The syndicates, far from being exclusive in membership and selfish in outlook, participate in the national well-being and contribute to its vitality and growth. The state would have failed both to protect the citizen and defend itself had it continued to allow national life to be buried in the ruins of the struggle between worker and employer.
Fascism established, as the legal boundary for state action, respect for national interests and national production. Beyond that boundary it gave free play to individuals in settling their differences. The individual is thereby protected by a twin order of considerations. If he joins the syndicate and participates in its activities, he finds himself automatically performing functions not merely of a private but of a public nature. If he chooses not to join the syndicate, he none the less enjoys the results of syndical activity. For the latter extends throughout the whole branch of production, regardless of whether an individual is or is not a member of the syndicate. Italian law has always insisted on the universality of syndical activity. But it also guarantees the voluntary character of syndicate membership.
It may be objected that the impulse toward syndicalism or occupational grouping is lessened unless all producers are members of the syndical organization. But one must not force the rhythm. No social structure can be reared on arbitrary foundations. Moreover, in the present development of economic organization in Italy, the quantitative requirements demanded by law for recognition of a syndicate are, from the theoretical point of view, a sufficient guarantee of the continued efficiency of syndical activity. In practice, virtually all the individuals engaged in certain branches of production have joined the syndicates. This can only mean a complete correspondence between syndical law and the needs of the producing population.
What is it which has facilitated the transition of the new Italian economic system from its first phase, purely syndical, to its present corporate phase? The answer is to be found in the fusion of the ends and objectives of individual occupational groups with those of the nation as a whole. The organ through which this fusion of interests takes place is the corporation.
After the organization of Italian syndicates in a unified hierarchical system (confederation, federations and local syndicates), the task confronting the fascist state was to devise a liaison between the organs at the top of the structure. Without a system of horizontal connecting organizations, the syndicates would be isolated, they would be walls without a roof. The fascist corporations serve as the connecting links. Thereby the various syndicates are brought into contact with one another and can collaborate with the government in the improvement of national production.
It will not be necessary to discuss the evolution of the Italian corporation in detail. Suffice it to say that as far back as 1926 corporations were established as connecting organizations between the various syndical associations. But it was only in 1930 that the reorganization of the National Council of Corporations definitely oriented the whole syndical movement toward its new and corporate phase. The transition is still taking place. This does not mean, however, that syndicalism as such is disappearing. The syndicates continue to carry out their essential functions without which corporative action would be meaningless and impossible. "Syndicalism," Mussolini writes, "cannot be an end in itself; it either exhausts itself in political socialism or is bound to converge toward the fascist corporation. For it is in the corporation that economic unity in its various elements (capital, labor, and technique) is realized. It is only through the corporation, that is, through the cooperation of all forces converging toward a single end, that the vitality of syndicalism is assured. In other words, syndicalism and corporativism are interdependent and mutually conditioning. Without syndicalism the corporation is not possible, and without the corporation syndicalism spends itself in its preliminary phases."
Hence corporativism, the logical outgrowth of Italian syndicalism, does not mean the suppression of the syndical movement. The fact that the corporation is an organ of the state does not in any way impair the autonomy of syndical associations. When corporations and syndicates meet, one of them does not necessarily give way. This is clearly implied in the provisions of the laws passed in 1926 and 1930, and is repeated also in the recent law of February 5, 1934, on the establishment of corporations.
What, then, is the Italian corporation?
The National Council of Corporations in November 1933 defined the corporation as "that instrument which, under the control of the state, helps in bringing about an organic coordination of the nation's productive forces with a view to furthering the economic well-being and political strength of the Italian people." The Council added that "the number of corporations to be established within the various major fields of production must, on the whole, correspond to the real necessities of the nation's economy. The general staff of the corporation must include representatives of the organs of the government, of the Fascist Party, of capital, labor, and of technical men." The Council also assigned to corporations "the specific tasks of conciliation and of consultation, and, through the National Council of Corporations, the task of passing laws designed to aid in regulating the economic activity of the nation."
By the law of February 5, 1934, these legal criteria were put into actual practice, the Italian corporation being given definite powers not only in the field of syndical coordination but also in the more important one of the coordination of national production. Articles 8, 10 and 11 of the law discuss in detail the power of corporations. Article 8 decrees that the corporation has the power "to determine rules for the collective regulation of economic activity and for a unitary regulation of production," a broad and sweeping statement purposely adopted in order to give the utmost flexibility to the newly-established organs. The fundamental reason for intervention in productive activity has been stated by Mussolini: "Economic activity of a purely private and individualistic character does not exist. From the day when man first became a member of a social group, no act which an individual undertakes begins or ends in himself. It has, on the contrary, repercussions which go far beyond his own person." Article 10 empowers the corporation to establish rates for economic services and consumption prices of those goods offered to the public under monopolistic conditions. Article 11 describes the legal means for enforcing rates for monopolistic services and prices. Thus the regulation of national production is entrusted to an organ, the corporation, which includes not only the syndicates (i.e. representatives of employers and of workers), but also the representatives of the Fascist Party (i.e. spokesmen for the community as a whole) and representatives of the various departments of the government.
The corporation itself thus becomes an organ of the state. It operates within the state and under its direct supervision. Consequently, fascist economy is not only a controlled or regulated or planned economy. It is something more: it is an organized economy. It is organized because of the cooperation of all productive forces under the control of the state. Neither state nor corporation takes production upon itself. Production remains in the hands of private industry, except in those rare cases where the state engages directly in production for political reasons. It is only the regulation, the coordination and the improvement of production which are entrusted to the corporation. The modern Italian corporation is essentially different, then, from the medieval corporation. The latter frequently found itself in open conflict with the state. Moreover, it regulated and controlled production in the selfish interests of its occupational group without regard for the interests of the consumer and the social group as a whole. The fascist corporation, while accepting the collaboration of various interested groups, embodies in its rules and regulations the general interests of society. The originality and effectiveness of the fascist solution lies in this new concept of the corporation.
Fascist Italy no less than the United States has endeavored to bring economic life under the regulation of public law. "As I see it," writes President Roosevelt, "the task of government in its relation to business is to assist the development of an economic declaration of rights, an economic constitutional order. This is the common task of statesmen and business men. It is the minimum requirement of a more permanently safe order of society. Happily, the times indicate that to create such an order is not only the proper policy of government but is the only line of safety for our economic structure as well. We know now that these economic units cannot exist unless prosperity is uniform -- that is, unless purchasing power is well distributed throughout every group in the nation."
This is what Mussolini is endeavoring to accomplish, when, by translating the economic conception into an ethical one, he perfects the organs which are to bring about greater social justice. What, exactly, is greater social justice? Mussolini defines it as "the assured right to work, an equitable pay, a decorous dwelling, the possibility of constant evolution and constant betterment." It means "that workers must acquire a more and more intimate knowledge of the productive process and learn to participate in its necessary regulation." The problem is one both of production and of distribution. "Modern science," observes Mussolini, "has succeeded in multiplying wealth. Science, controlled and stimulated by the will of the state, must now apply itself to solving the other great problem: that of the distribution of wealth, of ending the illogical and cruel phenomenon of misery and hardship in the midst of plenty."
The same vision of a society organized on a more stable basis and on principles of greater social justice animates the two national leaders; and the common ideal, strongly felt by both nations, is clearly reflected in their work. The instruments used in that work vary in conception and in detail, but the similarity of the ultimate goal makes possible analogies which have very deep significance.
The cardinal principle underlying the organization of the Italian corporation is that of the "productive cycle." A complete cycle of production extends from the recruiting of raw materials to the marketing of the finished product. Each corporation includes representatives of all major phases of the cycle.
The twenty-two newly-established Italian corporations have been divided into three main groups. The first group includes corporations representing a complete productive cycle. Among these are the corporations of grain and grain products, of viticulture, of sugar beets and sugar, of animal husbandry, fishing, and related products, of wood and wood products, of textiles and textile products. In the second group are corporations including only an industrial and commercial cycle. Among these are the corporations of the chemical industries, of the clothing industry, of the paper and printing industry, and of the building trades. The third group of corporations, the members of which are engaged in the production of services, includes the corporations of the liberal professions and arts, of credit and insurance, of sea and air transportation. Each corporation includes representatives, in equal number, of the workers and employers within the given field, and representatives of the Fascist Party and of the government. The presidency of each corporation is vested in the Minister of Corporations, while the vice-president is a member elected from the representatives of the Fascist Party. As has already been explained, among the important functions entrusted to the corporations are the regulation of national production, the coordination of collective labor relations, the settling of labor controversies and the task of acting as consultive organs to the national government.
There are many fundamental points common to the programs of President Roosevelt and Premier Mussolini. Both desire a more equitable distribution of wealth, the establishment of a more solid social equilibrium, and the elimination of the disturbances introduced into this equilibrium by the rise of powerful financial and industrial interests. But if the fundamental interests are the same, the means of action are quite different. Premier Mussolini endeavors to realize the ideal of greater social justice through the machinery of syndical and occupational representation and the transformation of unitarily organized economic groups into organs of the state. In the American program there still remains a definite separation between the state and the organizations of producers. In the United States there is still to be found on the one hand the state with its bureaucracy (the N. R. A. and its legal, research and planning divisions) and on the other the private producers, organized or unorganized, and free to act as they please except for such limitations as the government may impose. In this distinction lies, to my mind, the greatest difference between the two programs of social action.
Despite this difference, there are evident similarities between the Italian and American programs. These similarities are to be found primarily in the field of collective labor relations and in the institution established for the conciliation of labor disputes. Although they have similar objectives, even the labor institutions are not the same in the two countries. In the United States the newly-instituted National Labor Board acts only in an advisory capacity. In Italy the labor courts have authority to hand down definite verdicts; they can, moreover, prevent any recourse to strikes, lock-outs, or other violent means of class warfare. Another difference between the two programs is that in the United States the actual elaboration of codes rules and principles, including those in the field of labor relations, lies, despite the supervision of the government, primarily in the hands of the employers. In Italy, on the contrary, labor relations are settled by negotiation between syndical organizations of employers and workers, both of which have equal rights and legal status.
The American codes are intended not only to regulate collective labor relations but also to limit competition and unfair trade practices. But since they are drawn up exclusively for and within individual industrial groups, proper coordination among these various groups is difficult and uncertain. The result seems to be the triumph of the interests of the individual industrial group rather than the triumph of the interest of the community. In Italy, as we have seen, regulation of competition, questions of limitation of production and prices, of collective labor relations, etc., fall within the province of the corporation and of the National Council of Corporations. These institutions are in a much better position than is any one isolated industrial group to regulate not only particular group interests but also the interests of the community as a whole.
The success of American reform in the industrial field is bound up with the codes of fair competition. It will be interesting indeed to follow the further development of the experiment and to see how the American people, within the limits of their own traditions and institutions, will find a solution to the problem of state regulation of the forces of national production. A return to a system of absolute economic individualism is out of the question. There seem to remain only two possible directions in which further development can take place: increased state intervention and bureaucratic control, and the elevation of the nation's productive organizations to the dignity and responsibility of autonomous and self-governing organs of the state. The whole past of American civilization definitely points against the adoption of the first solution. For the second there is still lacking, at least at the present time, the indispensable legal framework to give a unity of purpose to a system of syndical or occupational representation. A corporate regulation of production in the Italian sense could only be achieved if, in the present codes, substantial changes were made permitting a much broader participation of labor. But given the present situation, it would seem that American public opinion must change greatly before the state, capital, and labor will be in a position to move harmoniously toward their common goal. In Italy a good part of the journey has already been completed. An equilibrium has been established, without a complete fusion or loss of individuality, between capital and labor, between labor and the state, and between the state and capital.