For what does Dionne pine—Liberal Fascism? Of course, the Constitution might have to go away!
“It is not in human nature to bear indefinitely the charges of an unproductive debt, and Hitler was the only political leader in Germany whose stand on German reparations payments showed clear recognition of this human attitude towards debt. [Lawrence Dennis, The Coming American Fascism (Harper & Brothers, 1936), Ch. VI: Debt Reduction a Necessary Preliminary to New Financing]
“If private ownership and management of producers’ goods is to be preserved, even in a modified form, it will be necessary to adopt a formula which can quickly straighten out the worst of the existing maladjustments due to the use of fixed money obligations; prevent, as far as possible, the recurrence of these and other types of maladjustment; and correct promptly in the future any maladjustments which occur in spite of preventive measures. So far as debts are concerned, this would seem to demand, first, equitable and efficient means of reducing debt burdens with a minimum disturbance and a maximum of conformity to economic possibilities; second, a new scheme of legal arrangements to provide for private ownership and management with a minimum of inflexibilities, and maladjustments–this new scheme amounting, as soon as possible, to a debtless economy; and third, a nationalized system of banking which would make bank credit or deposit money, as well as paper and metallic money, a state monopoly.
“A debtless economy, free of fixed interest charges and without legal enforcement of contracts which stipulate fixed money payments regardless of economic results, is the only formula of private ownership and management which can be made to work in anything but a frontier era, when lucky strikes and the steady rise in land values can be counted on to make the number of the victims of usury too small to have cognizance taken of them by ethics, law, or political economy. This ideal, debtless economy cannot be equitably or conveniently initiated by one wholesale extinction of all creditor rights unless the succeeding formula is to be communism. But any sound reorganization must, in the debt field, proceed on the principle that we have to scrap as fast as possible the theory and practice of interest. With the new principle established, or rather the ancient principle reestablished, the present debt burdens must be drastically reduced in all spheres according to a national formula of equity and redistribution of the debt burden.
“More explicitly, an ideal scheme of immediate procedure in debt reorganization might work somewhat as follows. First, state debts would be paid off in full, not with additional issues of paper money of considerably less value than the amount nominally owed, but with good money taken by a capital levy made on the progressive tax formula of the income and inheritance taxes now in force. There would be no liquidation of privately-owned property to provide money to pay this levy. There would merely be an attachment by the State of a certain percentage of privately-owned property, the income from which would go to the State to serve to retire any money issued to purchase the public debt. In this way, many large holders of government bonds would really pay themselves fifty cents of every dollar they were reimbursed on their government bonds. Savings bank and insurance funds, however, would thus be protected one hundred per cent against confiscation. There would be no expropriation, either by honest socialism or dishonest devaluation, except, of course, in so far as taxation may be thought to constitute expropriation.
“Second, all private and corporate debts would, so to speak, be laid on one table of a National Tribunal of Debt Conversion, which would carry out a number of different plans of conversion for different types of debts. In the case of the railroads and public utilities, there could be a simple pooling of all indebtednesses, and their assumption by state-administered holding companies for all the railroads and public utilities jointly. Then, whatever was deemed a fair and workable total payment of annual income would be distributed among the bondholders and claimants according to their, holdings and claims. This total amount for the railroads and utilities would vary from year to year according to economic conditions and social policy. In the cases of private debts, a great variety of formulas or settlements would have to be worked out, to fit different cases, but always on the principle that the creditor, mortgagee, or bondholder received an interest in obtainable future income in exchange for his old constitutional right of legal action, which gave him power to throw all sorts of monkey wrenches in the economic machinery, from mortgage foreclosure of a poor man’s home to plain blackmail suits in all kinds of reorganization or settlement procedures. Another ruling principle would have to be ample provision for new financing to secure needed working capital for operation and replacements. The proposed formula, possible under fascism but not the present system, would really amount to nothing more than giving the average capitalist money-lender or creditor, in a simple, orderly fashion, all that the situation, efficiently and humanely handled, would allow him.
“Under the present system that is all he gets, anyway, on the average; and often he does not get that, because of the legal and procedural fees and costs. But, in order to uphold the Constitution and support the largest army of lawyers per capita of any nation in the world, it cannot be done in a simple, orderly fashion. Under liberal capitalism according to the American constitutional formula, government has to guess at the Constitution, and have its guesses argued over by lawyers for years and finally validated or invalidated after years of confusion. There can, therefore, now be no executive readjustment–the only feasible form of readjustment of debt maladjustments.
“The foregoing outline of general principles for a program of reorganizing the debt-credit structure is obviously impossible of realization under the present system. But it, or a much better scheme, is workable, under other conditions. Our present theory and practice in regard to property rights, made explicit by the Courts in the interpretation and application of the Constitution and laws pursuant thereto (always in specific litigations), explain why any debt reorganization formula is impossible under the present system. Legal inventiveness, of course, can get around many constitutional difficulties but, as a general rule, only through recourse to devious expedients which can never be resolved into any scheme of national reorganization. Getting around the Constitution usually means or forces the giving of relief in an expensive and impractical manner. [Ibid, Ch. VII: A Debtless Economy the Ideal Formula]