Hitler and Mussolini rose to prominence as a result of pro-cyclical government economic policy

Tom Hickey turned me on to this post at the Daily Mail:

‘The Nazis came to power only in 1933, as an immediate consequence of the deflationary spiral that resulted from what Mr Wolf [commentator Martin Wolf, in an earlier article] refers to aptly as the "catastrophic austerity" introduced by Bruning.’

This jives with what I understand about economic history and I have cited this as well when discussing rising economic nationalism last April. My point in that article was that the US, a creditor nation, was fighting boom time inflation and turned to ‘austerity’ to defeat it. Europe on the other hand was seeing a debt-laden deflationary episode after the Great War:

…[In the US,] 1921 was an inflation-fighting recession, not a deflation-fighting one. So the macro environment was entirely different. The potential for an extreme deflationary or inflationary spiral was much less. Weimar Germany or Mussolini’s Italy are the correct analogues from 1921…


[Dylan Grice quote] …I believe the likelihood is that over the course of the next decade or so, the trend will be towards greater fiscal problems and greater economic problems. I believe these problems will increase the temperature of debates about whose fault it all is, and that as the conclusion to these debates becomes more polarized they will play into the hands of nationalist, anti-immigrant and increasingly, anti-euro sentiment.

Again, I do appreciate a well-argued case that this is not what is likely to happen. But unless we see a multi-year recovery economy in which the nagging debt and default issues are entirely removed, economic nationalism will return with a vengeance. And that means political conflict in which the potential for armed responses is high.

As I see it now one year later, the sentiments expressed in my post still ring true, more true even. As Mary Ellen Synon puts it at the Daily Mail:

What occurs to me… is that the three top people now forcing this catastrophic austerity on the eurozone are Angela Merkel from Germany, with its history of national socialism, ECB president Mario Draghi from Italy, with its history of fascism, and IMF chief Christine Lagarde from France, with its history of collaboration with Nazism.

But, God help us, they’ve all forgotten their own history.

Source: Merkel forgets Germany’s history: ‘Austerity not inflation gave us Hitler’ – Mary Ellen Synon, Daily Mail


Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.