Too often when defending free markets, conservatives find themselves doing mental gymnastics to defend the status quo - corporatism, or State capitalism.

There's a big difference!

Corporatism and Socialism in America

Indeed, corporatism, implemented by the state – whether through direct handouts, corporate bailouts, eminent domain, licensing laws, antitrust regulations, or environmental edicts – inflicts great harm on the modern American economy. Although leftists often misunderstand the fundamental problem plaguing the economy, they at least recognize its symptoms.

Conservatives and many libertarians, on the other hand, frequently dismiss many ills such as poverty as fabricated by the left-liberal imagination, when in fact it does a disservice to the cause of liberty and free markets to defend the current system and ignore very real and serious problems, which are often caused by government intervention in the economy. We should recognize that state corporatism is a form of socialism, and it is nearly inevitable in a mixed economy that the introduction of more socialism will cartelize industry and consolidate wealth in the hands of the few.

Leftists usually understand how wartime provides politically connected corporations with high profits and cushy contracts. What is more often neglected is that the history of the American domestic welfare and regulatory state also corresponds closely to the rise of corporatism. It is no coincidence.

Corporatism versus liberty in the 19th century

For about a hundred years the Jeffersonian tradition was mostly associated with the cause of the common man, whereas big government was often associated with monopoly privileges and big business. Hamilton and his philosophical progeny fought perennially for central banking, high tariffs, and subsidies to corporations to build “internal improvements.” Hamilton’s first major successor, Henry Clay, called this governmental corporate program the “American System.”

The Progressive Era

Corporate interests pushed through the most significant Progressive-Era government reforms in order to guarantee profits, which they had been losing to smaller businesses that had emerged in the relatively free market of the early 20th century. Gabriel Kolko’s groundbreaking book The Triumph of Conservatism best advances this thesis of how the government expanded to accommodate, rather than curb, the interests of big business. Though a New Leftist, Kolko shows how political capitalists in every industry – from meatpacking to coal, from railroads to insurance – embraced the expanding regulatory state for their own gain – to push competitors out of the market and give government legitimacy to their companies.

Kolko shows how, in spite of the conventional history that characterizes the Progressive Party’s nomination of Teddy Roosevelt in 1912 as a response to the backwards laissez-faire William Howard Taft administration, in reality the party was favored by large businesses with whom Teddy Roosevelt had strong ties and whom Taft had alienated by failing to accommodate and empower through the regulatory state.

The New Deal

Both Franklin Roosevelt’s admirers and his detractors often think of his New Deal legacy as generally socialistic. Like the Progressive Era, the New Deal is widely misunderstood: it did indeed attack the free market, but often did so at the behest of corporate interests.

Such interests were largely behind the emergence of the National Recovery Administration, which exemplified FDR’s economic central planning. Far from being a purely egalitarian agency, the NRA was largely modeled after the policies of Mussolini, who had yet to be considered an enemy by most Americans, but rather was still seen as an inspiration by many. As John Flynn explained in his book, The Roosevelt Myth ...

Corporatism and socialism in today’s America

In more recent years, corporate interests have often cheered on big government programs, often the same ones championed by those who consider themselves anti-corporate. In the late 1990s, the now-defunct Enron was one of the largest lobbying influences behind the international Kyoto Treaty, which would have forced the world to comply with a ghastly web of new regulations and would have meant large energy contracts for Enron, had the company not gone bankrupt. The antitrust breakup of Microsoft was a de facto giveaway to competitors such as Netscape. (One of the complaints about Microsoft was that it intended merging with AOL, a company with which Netscape has since joined forces.)

Bush’s farm subsidies are direct welfare for the biggest agricultural corporations, and his protectionist trade policies are indirect welfare for politically favored businesses. His recent expansion of Medicare has been both the greatest augmentation of the American welfare state in decades and a giveaway to large pharmaceutical corporations. If universal health care ever comes to America, the corporations are likely to stay intact but will no longer have to satisfy customers, only the politicians.

Corporate Socialism 102

[W]hat we have in America is a government that takes capitalism and perverts it beyond recognition while still calling it capitalism. So when it was the Democrat-run government that flooded Wall Street with easy money, the Leftists did not hesitate in blaming the free market system for the crisis. So when it was the Democrat-run government that inflated the pockets of “fat cat” bankers, the Leftists did not hesitate in pointing their crooked, accusing fingers at banks for paying out huge bonuses. People do not understand that the Left’s war on the free market comes from two sides: the anti-business front and the pro-business front. The anti-business front is the open strategy, the one that they are proud of, the one where they raise taxes, fees, increase unnecessary regulations, and the like… of course, all of the penalties that they impose on business trickle down to the consumers who pay higher prices and have poorer quality. The pro-business front is the one where they favor some big corporations over small business, giving them implicit government guarantees, giving them preferential treatment, and giving them bailouts… this, until recently, was more secret than their anti-business policies. What is deceiving about their “pro-business” policies is the fact that they do not in fact promote capitalism, they handicap capitalism by marrying big business with government and giving a ridiculously unfair advantage to the “connected” companies. This is not capitalism. In capitalism, it is competition, supply and demand, and innovation that keep the economy humming and prices fair. In corporate socialism, the current system in America, the government picks and chooses the winners and loser and distorts the markets. This is part of the plan. The Leftists aspire to establish a society where the state controls all of the means of production ... Once small business has been destroyed and few firms control all industries, then the government with step in and take control of these de facto monopolies. In the meantime, businessmen stand to make a fortune by cooperating with the Leftist pro-government policies. They raid the US budget, courtesy of the US taxpayer and the Leftists who hold the purse strings ... Who wins at the end? Pro-leftist businessmen and the power-hungry communists.

Paid Off Pundits

President Obama spent most of December 4 touring Allentown, Pennsylvania, meeting with local workers and discussing the economic crisis. A few hours later, the state's former governor, Tom Ridge, was on MSNBC's Hardball With Chris Matthews, offering up his own recovery plan. There were "modest things" the White House might try, like cutting taxes or opening up credit for small businesses, but the real answer was for the president to "take his green agenda and blow it out of the box." The first step, Ridge explained, was to "create nuclear power plants." Combined with some waste coal and natural gas extraction, you would have an "innovation setter" that would "create jobs, create exports."

As Ridge counseled the administration to "put that package together," he sure seemed like an objective commentator. But what viewers weren't told was that since 2005, Ridge has pocketed $530,659 in executive compensation for serving on the board of Exelon, the nation's largest nuclear power company. As of March 2009, he also held an estimated $248,299 in Exelon stock, according to SEC filings.

Moments earlier, retired general and "NBC Military Analyst" Barry McCaffrey told viewers that the war in Afghanistan would require an additional "three- to ten-year effort" and "a lot of money." Unmentioned was the fact that DynCorp paid McCaffrey $182,309 in 2009 alone. The government had just granted DynCorp a five-year deal worth an estimated $5.9 billion to aid American forces in Afghanistan. The first year is locked in at $644 million, but the additional four options are subject to renewal, contingent on military needs and political realities.

In a single hour, two men with blatant, undisclosed conflicts of interest had appeared on MSNBC. The question is, was this an isolated oversight or business as usual? Evidence points to the latter.

These incidents represent only a fraction of the covert corporate influence peddling on cable news, a four-month investigation by The Nation has found. Since 2007 at least seventy-five registered lobbyists, public relations representatives and corporate officials--people paid by companies and trade groups to manage their public image and promote their financial and political interests--have appeared on MSNBC, Fox News, CNN, CNBC and Fox Business Network with no disclosure of the corporate interests that had paid them. Many have been regulars on more than one of the cable networks, turning in dozens--and in some cases hundreds--of appearances.

Corporatism / crony-capitalism / corporate socialism is NOT representative of free markets. Instead, it represents socialism, or more accurately ... Economic Fascism.

  • Matt

    Impressive. This should be mandatory reading.

    • theCL

      I agree. So much for the theory that "unfettered" free markets ever caused any trouble.