The name the organizers of fascism in Germany gave to their movement is not accidental: Nationalsozialistische Deutsche Arbeiterpartei. The movement presented itself as nationally socialist, meaning that Germans form a unique community knit together by their nationality: Nationalsozialistische Deutsche, German national socialist. More importantly for our purposes, this movement held labor to be central to its mission: Arbeiterpartei. It was a worker’s party. Obviously this did not mean that the Nazis supported the established trade unions, much less the established socialist or communist organizations. To the contrary, in their view, insofar as these organizations had placed class above nationality, they had only served to divide the nation. The German national socialist worker’s party — the Nazis — placed nation above all else. “Germany first,” was their motto.
While it is important that we grasp the contours of the central models that govern labor economics — which we focus on in weeks 4 through 15 — it is also essential that we grasp how the world in which you will be practicing labor economics will be fundamentally different than the world in which economists have practiced labor economics since, let us say, 1945. This has not been an abrupt shift. From 1945 through 1971, most mainstream economists adopted various elaborations of the standard Keynesian or neo-Keynesian model. Yet, beginning with the currency devaluation in 1971 and then increasingly throughout the 1970s and 1980s, economic models and policy choices much closer to the models and choices familiar to us from the 1890s through 1920s came to dominate policy circles, specially in Great Britain and the United States.
It is not immaterial to be curious over what is cause and what is effect in this transition. Did the changing shape of economic relations give rise to a transformation in economic theory; or did a recovery of classical theoretical perspectives perhaps generate a new set of policy alternatives? And, yet, however important it may be to nail down causal links, on some level we already know that causation moved in both directions; that is was mutually reinforcing and mutually constitutive.
We must also be aware that the increasingly abstract, mathematical character of economic theory and practice removed economic policy several steps from the common-sense household “checkbook” economics of income and spending that makes sense to individuals not trained in academic economics. When, therefore, economists stepped forward in the 1970s and 1980s promoting economic policy grounded in household “checkbook” economics (as distinguished from mathematically rigorous neo-Keynesian economics) it makes sense that broad segments of the public would find this version of economics more palatable than the mathematically rigorous neo-Keynesian economics that informed policy decisions across the political spectrum from 1945 to 1971. (Never mind that households set no interest rates, issue no currencies, post no bonds, etc.)
What we do know with absolute certainty is that labor economics functions somewhat differently under despotic, totalitarian, and fascist regimes than it does under standard social democratic regimes. If therefore I were to instruct students on models that assume social democratic normality when, in fact, such conditions no longer hold true, I would be preparing students to practice economics in a world that no longer exists.
This is important because it may appear as though I am politicizing labor economics. (I am a graduate of the University of Chicago, so this is highly unlikely on its face.) The truth is that students of labor economics must be prepared for the world that actually exists; and reflecting critically on the events from 1914 through 1945 may prepare to be better economists in the traditional sense — attempting to accurately model the shape of economic decision-making — than simply a blind recitation of modeling that once held true but holds true no longer. We need to be creative, self-aware, historically present and ready to engage new theory to understand the emerging world.
In a week we will throw ourselves full bore into rigorous economic modeling; but it will be sadly rigorous economic modeling that applies to a world that no longer exists. The preface we have indulged in for the past four weeks, I am hoping, will prepare us to think creatively about how we might bend the standard models to fit new conditions, conditions that can be described, generally, as fascist, authoritarian, and despotic. This does not relieve us of the responsibility to practice economics. But it does introduce variables and coefficients that generally have not been present in standard neo-Keynesian economic theory.