Free Capitalist Network - Community Archive
Mises Community Archive
An online community for fans of Austrian economics and libertarianism, featuring forums, user blogs, and more.

Corporatism Vs. Capitalism

rated by 0 users
This post has 16 Replies | 4 Followers

Not Ranked
Posts 71
Points 1,975
James Greene Posted: Fri, Mar 20 2009 5:51 PM

A concept that I thought would be interesting to explore in forum conversation are the specific ways in which corporatism differs from free market capitalism and why it is that so many socialists, communists, left wing liberals and so forth fail to see the difference between the two and wrongly label capitalism as the problem when in reality the current American system hardly resembles anything close to free market capitalism.

I am an avid supporter of a non-centrally planned free competitive market and I believe that if these socialist types went into further investigation they would find that it is actually governmental interference in the free market on behalf of special interests, or corporatism, that creates many of the ills of society.  Without the cancerous growing state that big business leaches onto and largely takes over, I don't believe that we would see such monopolistic institutions.  Do you think that I am correct in this belief?

This issue could also be worded as Free Market Capitalism vs Monopolist Capitalism, where monopolies are much more easily formed due to excessive taxation and regulation that stifles small business from competing efficiently and fairly with the established too-big-to-fails. 

We all know that there are many irrational and misguided capitalist haters in the world who see our current state of affairs as perhaps the end of the free market and capitalism.  I can sympathize, because I loath corporatism and I know that they are seeing corporatism and mistaking it for capitalism.  I can sympathize with Marxists for wanting to overthrow the capitalist exploiters, because I do think that there is rampant corruption amongst big business.  I think though, that it is incredibly important to stress to these misguided multitudes that it is the state where the fault lies and that without the state, it's many bureaucracies and central bank, this wouldn't be happening.  It is fascism

The misled capitalist haters know that Karl Marx described capitalism as being inherently unstable and that over time it would eat away at itself through boom and bust economic cycles and that it would slowly transform into various degrees of socialism before finally giving way to a utopia of communism.  What they don't know or understand is that it is the anti free market central bank planning along with slowly creeping in socialistic interferences in the free market that have given rise to our destructive boom bust cycle that is bringing capitalism to its knees.  I believe that it can irrefutably be said that Marx was wrong.  It is not capitalism that will destroy itself and give way to socialism.  It has been increments of socialist interference in capitalism which have eaten away at capitalism from the inside out.

Thoughts?  What do you think are some of the key differences between Corporatism and Capitalism?  What regulations or tax code cheats and loops do you know of that favor the establishment at the expense of small business and the public at large?  Why do you think that the myths of Marx and/or left wing ideas of socialism fail to see the difference between corporatism and capitalism?

Feel free to comment on any and all things Corporatism Vs Capitalism.

 

 

  • | Post Points: 80
Top 25 Contributor
Posts 4,532
Points 84,495
Stranger replied on Fri, Mar 20 2009 6:12 PM

I think we could define corporatism as a system of legal privilege that protects the structure of a corporation against capitalists. For example in the USA shareholders have little power over the major industries other than as someone a dividend must be paid to. The executives in the corporate hierarchy control the corporation, the capital-owners control nothing. This is how it has come to be that executives pay themselves immense salaries, bonuses and other income out of money the rightfully belongs to capitalists.

This is also why American corporations are largely ruined.

  • | Post Points: 20
Top 10 Contributor
Male
Posts 4,985
Points 90,430

James Greene:
What do you think are some of the key differences between Corporatism and Capitalism?

Stranger gave an excellent definition. But the point I'd like to make is that provided you can show government intervention in regards to regulation business and any other features of corporatism, and to the extent that the intervention in question exists the means of production are in the control of the state. Which is the definition of socialism.

"You don't need a weatherman to know which way the wind blows"

Bob Dylan

  • | Post Points: 5
Top 150 Contributor
Male
Posts 516
Points 7,190
bbnet replied on Fri, Mar 20 2009 7:15 PM

Monopolies aren't bad if they are supported by and created through the free market. 

We are the soldiers for righteousness
And we are not sent here by the politicians you drink with - L. Dube, rip

  • | Post Points: 35
Not Ranked
Posts 71
Points 1,975

bbnet:

Monopolies aren't bad if they are supported by and created through the free market. 

 

Agreed

  • | Post Points: 20
Top 75 Contributor
Posts 1,005
Points 19,030
fakename replied on Fri, Mar 20 2009 10:55 PM

why do liberals believe that it is capitalism and not corporatism that exists today?

 

Why did the romans think that romulus was descended from a god?  They see corporations allied with government and since they are already trained to believe some marxist or social democratic theory about how businessmen corrupt government or how government is just the manifestation of business, they see what they want to see.

 

We on the other hand understand the true theory and so we know what the data really says.

  • | Post Points: 20
Top 500 Contributor
Posts 333
Points 6,365
garegin replied on Fri, Mar 20 2009 11:40 PM

you want the answer? because what people call it. the 19th century system was called laissez faire and people saw the wide discontent. so they drew a simplistic conclusion. free markets=mass misery. the root of the problem is lack of reasoning ability. look sweden is socdem and they have better living standarts than congo. hence mixed economy is better than laissez faire.

  • | Post Points: 20
Top 50 Contributor
Posts 2,491
Points 43,390
scineram replied on Sat, Mar 21 2009 10:35 AM

Because Congo is laissez faire?

  • | Post Points: 5
Not Ranked
Posts 24
Points 910
RayLopez replied on Sat, Mar 21 2009 10:53 AM

You might want to research the "theory of the firm".  What this says is that at a non-perfect competition level, which is a lot of the real economy, you actually have imperfect competition which can lead to game theory outcomes (monopoly being an example).  Monopoly actually can give, due to economies of scale, greater output and lower prices than atomized perfect competition.  But--and this goes to corporatism--at the most fundamental level a corporation is not unlike a communist entity (as anybody who has worked for a corporation knows) because internal pricing is not present--a lot of what a corporation does internally is not governed by prices--but by non-price sensitive behavior, such as rent seeking (e.g., brown nose corporate boffins) and business decisions that may or may not be correct (e.g., half of all corporate mergers and acquisitions end in failure).  However, hopefully corporations do compete with each other at the external level when dealing with the public (this goes to the free market), and barriers to entry are low enough so that if a corporation is so out of touch with their customers the corporation will go bust and/or new corporations will take their place (pace Washington DC).  I'm not sure I answered your question, but Google Kenneth Arrow and the Theory of the Firm.  A lot of work was done after WWII in this area and it remains a hot topic.  For example, if monopolies have economies of scale, why doesn't one firm rule the world (Microsoft anyone?)?

RL

  • | Post Points: 20
Top 25 Contributor
Posts 4,532
Points 84,495
Stranger replied on Sat, Mar 21 2009 10:59 AM

RayLopez:
I'm not sure I answered your question, but Google Kenneth Arrow and the Theory of the Firm.  A lot of work was done after WWII in this area and it remains a hot topic.  For example, if monopolies have economies of scale, why doesn't one firm rule the world (Microsoft anyone?)?

Here is a fine exemplar of the profundity and insight of neoclassical economics. Why doesn't one firm rule the world? That's what Marx said would happen!

  • | Post Points: 5
Not Ranked
Posts 71
Points 1,975

Stranger:

I think we could define corporatism as a system of legal privilege that protects the structure of a corporation against capitalists. For example in the USA shareholders have little power over the major industries other than as someone a dividend must be paid to. The executives in the corporate hierarchy control the corporation, the capital-owners control nothing. This is how it has come to be that executives pay themselves immense salaries, bonuses and other income out of money the rightfully belongs to capitalists.

This is also why American corporations are largely ruined.

This is very interesting.  Is this not a result of a free market?  Or, as you say, is there a set of regulations and/or laws that have created such a system of immense executive pay at the expense of the real capitalists?  Any further reading on this topic that you could point me in the direction of?

I have always found it incredible that corporate CEOs quite normally receive bonuses of multiple millions of dollars every year.  I have a hard time believing that anyone is worth that much.

  • | Post Points: 20
Top 150 Contributor
Posts 659
Points 13,990
ama gi replied on Sat, Mar 21 2009 5:52 PM

Of course monopolies are bad.

bbnet:

Monopolies aren't bad if they are supported by and created through the free market. 

But then they are not monopolies; they are legitimate, successful businesses that happen to have a larger market share.

"As long as there are sovereign nations possessing great power, war is inevitable."

  • | Post Points: 5
Top 200 Contributor
Male
Posts 481
Points 7,280
DBratton replied on Sat, Mar 21 2009 6:16 PM

James Greene:
why it is that so many socialists, communists, left wing liberals and so forth fail to see the difference between the two and wrongly label capitalism

 

I think the difference stems from how the two sides view the legitimacy of profit. To a (true) Capitalist, profit obtained through free trade is legitimate but profit obtained through government favors is not. But the socialists don't see that distinction. To them all profit is illegitimate.

I see Corporatism as just another name for Mercantilism, with Mercantilism being defined as the use of force, usually by the state, to produce particular winners and losers in the market. The left view the question in terms of profit and tend to see Mercantilism/Corporatism as just a species of Capitalism; whereas I view the question in terms of force and consider Socialism to be a species of Mercantilism.

  • | Post Points: 20
Top 200 Contributor
Male
Posts 414
Points 6,780
MatthewF replied on Sat, Mar 21 2009 6:40 PM

DBratton:

I think the difference stems from how the two sides view the legitimacy of profit. To a (true) Capitalist, profit obtained through free trade is legitimate but profit obtained through government favors is not. But the socialists don't see that distinction. To them all profit is illegitimate.

RayLopez:

business decisions that may or may not be correct (e.g., half of all corporate mergers and acquisitions end in failure).

Here's the key insight: Most people I know aren't hardcore socialists yet buy into the lie that we are living in a capitalist society and that it is the root of our social ills. It is because of a misunderstanding of the nature of profit, specifically that the other side of the coin involves LOSS.

If profit is the great evil, then certainly loss must be a blessing...

The fact that so many businesses fail should be proof positive of the power of the marketplace to enforce consumer preferences.

  • | Post Points: 20
Top 500 Contributor
Posts 333
Points 6,365
garegin replied on Sat, Mar 21 2009 7:40 PM

"Because Congo is laissez faire?"

ok, bangladesh. (im being a devil's advocate here, because in reality a lot of poverty is caused by embargos/tariffs

  • | Post Points: 5
Top 25 Contributor
Posts 4,532
Points 84,495
Stranger replied on Sat, Mar 21 2009 11:18 PM

James Greene:

 

This is very interesting.  Is this not a result of a free market?  Or, as you say, is there a set of regulations and/or laws that have created such a system of immense executive pay at the expense of the real capitalists?  Any further reading on this topic that you could point me in the direction of?

I have always found it incredible that corporate CEOs quite normally receive bonuses of multiple millions of dollars every year.  I have a hard time believing that anyone is worth that much.

Here is one article. It doesn't go in depth into the close ties between politicians and the executive class, that's a story that's being written as we speak.

  • | Post Points: 20
Not Ranked
Posts 71
Points 1,975

How about antitrust laws?  I have heard that these actually stifle competition.  Surely a symptom of corporatism where interference in the free market creates more monopolistic institutions that otherwise would not exist at such magnitude in a truly free market.  There is a book I have been meaning to read called Antitrust: The Case for Repeal.  Any thoughts on this?

  • | Post Points: 5
Page 1 of 1 (17 items) | RSS