The United States has not experienced a free market since the beginning of the Progressive Era. This is why blaming the "free markets" and/or "lack of regulation" for the recent financial collapse rings hollow. It's just blaming a ghost.

At the same time, too many people (conservatives) defend Big Business as if that's a defense of free markets. It isn't.

For a long time now, what our economy can best be described as is corporatist, or corporatism. The following links provide various explanations what of corporatism is.

Please take the time to read each article, because whether you're on the Left or Right, it doesn't matter ... Corporatism thrives at the expense of us all.

What is American Corporatism?

What is corporatism? In a (somewhat inaccurate) phrase, socialism for the bourgeois. It has the outward form of capitalism in that it preserves private ownership and private management, but with a crucial difference: as under socialism, government guarantees the flow of material goods, which under true capitalism it does not. In classical capitalism, what has been called the "night-watchman" state, government's role in the economy is simply to prevent force or fraud from disrupting the autonomous operation of the free market. The market is trusted to provide. Under corporatism, it is not, instead being systematically manipulated to deliver goods to political constituencies. This now includes basically everyone from the economic elite to ordinary consumers.

Realizing that our society is corporatist is the key to undoing many conservative misunderstandings. For example, we tend to be puzzled when the rich support the Left, which under classical capitalism they generally didn't. But in a society where government takes care of business, they often have a lot to gain from big government. Not to mention the fact that whole classes of the wealthy, i.e. lawyers, doctors, lobbyists, environmental consultants, defense contractors and others, make their money either helping people deal with government or are indirectly funded by government. Ownership of property used to make people conservative because they intuitively grasped that the means of the conservation of property were bound up with the means of the conservation of everything else: religious orthodoxy to social mores to cultural tradition to the Constitution. But now that corporatism has co-opted threats to property ownership, they don't feel the need for these things anymore.

Corporatism and Socialism in America

Principled advocacy of the free market requires an understanding of the differences between genuine free enterprise and “state capitalism.” Although the Left frequently exaggerates and overemphasizes the evils of corporate America, proponents of the free market often find themselves in the awkward position of defending the status quo of state capitalism, which is in fact a common adversary of the free marketer and the anti-corporate leftist, even if the latter misdiagnoses the problem and proposes the wrong solutions.

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.

The Economic System of Corporatism

In the last half of the 19th century people of the working class in Europe were beginning to show interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly the Catholic intelligentsia, decided to formulate an alternative to socialism which would emphasize social justice without the radical solution of the abolition of private property. The result was called Corporatism. The name had nothing to do with the notion of a business corporation except that both words are derived from the Latin word for body, corpus.

The basic idea of corporatism is that the society and economy of a country should be organized into major interest groups (sometimes called corporations) and representatives of those interest groups settle any problems through negotiation and joint agreement. In contrast to a market economy which operates through competition a corporate economic works through collective bargaining. The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism. He would gather the parties to some dispute and say, "Let us reason together."

The Fascist Corporatism of Bush and Obama

It is a disturbing sign of the times that even though the bailout of the Detroit automakers failed to win congressional approval, President Bush has just announced that he will carry out the bailout on his own authority. At the same time, Henry Paulsen has announced that he has already spent $350 billion of the financial bailout money and is now prepared to spend the second $350 billion. All of this and more has been supported by Barack Obama who promises to continue in the path of Bush towards using taxpayer money to protect corporations from collapse while introducing federal management of large sectors of the American economy. During the presidential campaign, John McCain agreed with both Bush and Obama on the need for such governmental control of the economy.

So what do we call this? This is not free-market capitalism, because government is intervening to protect failing corporations from the consequences of their economic decisions. This is not pure socialism, because private property and markets have not been completely abolished by the government intervention. In a previous post, I called this "market socialism." But a better label might be "fascist corporatism."

The Business-Government Alliance

Up until the 1960s, the morality play purporting to explain the enormous rise of state power in twentieth-century America was a simple one. Liberals and leftists hailed the growth of government intervention as the result of a drive by workers, farmers, and altruistic intellectuals overriding opposition by selfish big-business interests. Conservatives portrayed the mirror image of this saga: unions, egalitarians, leftists and other lumpen rising up to cripple big business. As Ayn Rand put it in one of her more egregious pronunciamientos: Big business was "America’s persecuted minority" par excellence.

There were always grave anomalies in this picture. For what does one do with the legion of pro-New Deal, -Fair Deal, -Great Society big businessmen: the Paul Hoffmans, the Averell Harrimans, the Rockefeller brothers? Neither the liberal explanation that these were unusually "enlightened" or "intelligent" sports, nor the conservative psycho-smear that they were brainwashed into feeling guilty about their wealth by liberal prep-school teachers, was particularly compelling. Especially when everyone knew that such government intervention as tariffs or import quotas on steel, for instance, were lobbied for, neither by altruists nor by the brainwashed guilt-ridden, but by steel manufacturers anxious to secure their profits from more efficient foreign competition. But if that was the motive for business enthusiasm for this particular kind of government intervention, why not for others?

The faulty conventional paradigm was successfully broken in the 1960s, when New Left historians, joined in an unusual historiographical coalition by free-market economists and historians, turned the picture around. They showed that various big-business groups had become, as early as the turn of the twentieth century, "corporatists" or "corporate liberals," anxious to replace quasi-laissez-faire capitalism by a cartelized corporatist system, directed or even planned by Big Government in intimate partnership with Big Business, and creating Big Unions to participate as junior partners in this new "mixed" economy. The push for the new corporate state was generated by an alliance between corporatist big-business groups and technocratic intellectuals, eager to help run and to apologize for the new system, which promised them a far plusher niche than did a freely competitive economy.

Much of this historiographical battle has now been won.

Electoral politics is meaningless ... unless we actually know both what we're fighting for, and what we're fighting against. Otherwise, it's SSDD ... same shit different day.

Corporatism is slowly eating us all.

  • http://www.thats-right.com Russ

    Ok, fine, but why the need for another name? Why not just call it what it is...socialism. There's no need to confuse people with this label. I'd prefer it if people like Rockwell and Paul would just explain that any and all government intervention in the market is some form of socialism or another. The problem with both of those particular characters is that they spin the conspiracy yarn without a shred of real evidence. I personally do believe that there is a certain level of collusion at the top, but instead of stoking the conspiracy flames, we need to do a better job of just explaining economics.

    This is why I can't stand Rockwell because he stopped doing that a long, long time ago and has chosen instead the lazy conspiracy and shock value route. He didn't have to but it certainly helps his own blog and book sales. Mises.org, on the other hand, hasn't felt the need to spiral into the conspiracy abyss to explain economics to people.

    It's socialism. That's it. There's no need to invent another useless label.

    Good post CL.

  • theCL

    The first article was from FrontPage Magazine (neocon), which is hardly Rothbardian. Nor is there anything about any of the above that implies a conspiracy theory.

    Corporatism is different than socialism, or fascism, or communism ... You can learn about it from an intellectual perspective, or stick to simple bumper-stickers ... like Republican = conservative, big business = free markets.

    You can find conspiracy theories that turned out to be true in my conspiracy section. But this post is just plain, old fashioned economics.

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