Corporatism, Capitalism, and the Constitution

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Corporatism, Capitalism, and the Constitution

Cap­i­tal­ism has very much become the boo­gie­man amongst
pro­gres­sives. It has been blamed for
caus­ing mass poverty, destroy­ing the envi­ron­ment, and so many other evils in the
United States.

Cor­po­ra­tions are an even big­ger boo­gie­man than cap­i­tal­ism
for pro­gres­sives, They’ve become the
num­ber one vil­lain in movies and tv series pro­duced by ultra-​liberal Hollywood.

Cap­i­tal­ism deserves none of the blame for the evils that exist in the Amer­i­can econ­omy, and cor­po­ra­tions deserve only a par­tial blame. This is because for the past many decades the econ­omy of this coun­try has been a cor­po­ratist econ­omy rather than a cap­i­tal­ism econ­omy. Here is how the Mer­riam Web­ster online dic­tio­nary defines corporatism:

the orga­ni­za­tion of a soci­ety into indus­trial and pro­fes­sional cor­po­ra­tions serv­ing as organs of polit­i­cal rep­re­sen­ta­tion and exer­cis­ing con­trol over per­sons and activ­i­ties within their jurisdiction.

In a cor­po­ratist econ­omy the gov­ern­ment and the cor­po­ra­tions are deeply in bed together. The cor­po­ra­tions con­tribute enor­mous sums of money to politi­cians who write laws and reg­u­la­tions that ben­e­fit cor­po­ra­tions. The cor­po­ra­tions grow larger and more wealthy allow­ing them to con­tribute more money for the writ­ing of more laws and reg­u­la­tions. The end result is that a par­tic­u­lar cor­po­ra­tion achieves a monop­oly in a given indus­try allow­ing them to raise prices and pro­vide sub­stan­dard ser­vice with­out fear of competition.

Crony cap­i­tal­ism is another name for cor­po­ratism. Thanks to Oba­maCare and so many other laws
and reg­u­la­tions, health­care is one indus­try ruled by cor­po­ratism. This is doc­u­mented in this Mises Wire arti­cle
Do We
Have a Free-​Market Med­ical System?

I think the most apt descrip­tion would be “crony cap­i­tal­ist” med­i­cine, one in which pow­er­ful spe­cial inter­ests con­spire with gov­ern­ment offi­cials to cre­ate legally man­dated monop­o­lies, with the spe­cific goal of thwart­ing free mar­ket competition.

The author of the arti­cle goes on to say how free mar­ket
cap­i­tal­ism would solve these prob­lems caused by crony capitalism.

In a gen­uine free mar­ket sys­tem, prices reflect the deci­sions of con­sumers. Pro­duc­ers who solve sig­nif­i­cant prob­lems are rewarded with high prices and prof­its. High prices and prof­its in turn attract lots of com­pe­ti­tion. The com­pe­ti­tion not only pre­vents monop­oly. It also improves qual­ity and very impor­tantly increases sup­ply, which is the only sus­tain­able way to reduce prices. Con­sumers then get bet­ter med­i­cine and ever lower prices. Pro­duc­ers dis­like com­pe­ti­tion, and there­fore try to buy gov­ern­ment help in manip­u­lat­ing or fix­ing prices.

There are pow­er­ful lob­by­ing groups that exist solely for
pur­pose of ensur­ing that politi­cians con­tinue to cre­ate an envi­ron­ment that favors
large cor­po­ra­tions. The Mises arti­cle Cham­ber of Cor­po­ratism
dis­cusses this in great detail.

Cham­bers and other lob­by­ing arms of the busi­ness com­mu­nity are in the game of social­iz­ing their costs and pri­va­tiz­ing their prof­its. Nat­u­rally, these groups will seek to lower taxes on their prof­its, for exam­ple, but they will often enthu­si­as­ti­cally sup­port statewide income taxes or sales taxes that will cost the larger pop­u­la­tion plenty, but will dis­pro­por­tion­ately ben­e­fit busi­ness groups.

Free Mar­ket Cap­i­tal­ism, which built the United States into
the most pros­per­ous and freest nation, is far supe­rior to cor­po­ratism Here is how cap­i­tal­ism is defined by the Mer­riam
Web­ster online dictionary

an eco­nomic sys­tem char­ac­ter­ized by pri­vate or cor­po­rate own­er­ship of cap­i­tal goods, by invest­ments that are deter­mined by pri­vate deci­sion, and by prices, pro­duc­tion, and the dis­tri­b­u­tion of goods that are deter­mined mainly by com­pe­ti­tion in a free market

Cap­i­tal­ism has often been decried by pro­gres­sives because
they claim that sys­tem func­tions on greed.
Mil­ton Fried­man answers that crit­i­cism in the tran­script from this video

Well first of all, tell me: Is there some soci­ety you know that doesn’t run on greed? You think Rus­sia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fel­low who’s greedy. The world runs on indi­vid­u­als pur­su­ing their sep­a­rate inter­ests. The great achieve­ments of civ­i­liza­tion have not come from gov­ern­ment bureaus. Ein­stein didn’t con­struct his the­ory under order from a bureau­crat. Henry Ford didn’t rev­o­lu­tion­ize the auto­mo­bile indus­try that way. In the only cases in which the masses have escaped from the kind of grind­ing poverty you’re talk­ing about, the only cases in recorded his­tory, are where they have had cap­i­tal­ism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of soci­eties that depart from that. So that the record of his­tory is absolutely crys­tal clear, that there is no alter­na­tive way so far dis­cov­ered of improv­ing the lot of the ordi­nary peo­ple that can hold a can­dle to the pro­duc­tive activ­i­ties that are unleashed by the free-​enterprise system.

Pro­gres­sives have also decried
cap­i­tal­ism because it pro­duces an unequal dis­tri­b­u­tion of wealth. That crit­i­cism was answered by Mil­ton
Fried­man in Free
to Choose: A Per­sonal Statement

In the past cen­tury a myth has grown up that free mar­ket cap­i­tal­ism — equal­ity of oppor­tu­nity as we have inter­preted that term — increases such inequal­i­ties, that it is a sys­tem under which the rich exploit the poor. Noth­ing could be fur­ther from the truth. Wher­ever the free mar­ket has been per­mit­ted to oper­ate, wher­ever any­thing approach­ing equal­ity of oppor­tu­nity has existed, the ordi­nary man has been able to attain lev­els of liv­ing never dreamed of before. Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those soci­eties that do not per­mit the free mar­ket to oper­ate. That is true of feu­dal soci­eties like medieval Europe, India before inde­pen­dence, and much of mod­ern South Amer­ica, where inher­ited sta­tus deter­mines posi­tion. It is equally true of cen­trally planned soci­eties, like Rus­sia or China or India since inde­pen­dence, where access to gov­ern­ment deter­mines posi­tion. It is true even where cen­tral plan­ning was intro­duced, as in all three of these coun­tries, in the name of equality.

Cor­po­ratism on the state or local level pro­duces neg­a­tive
results. This is noth­ing com­pared to the
neg­a­tive effects pro­duced by cor­po­ratism on the fed­eral level. Laws and
reg­u­la­tions on the fed­eral level ben­e­fit­ing cor­po­ra­tions should not exist at
all. Any laws reg­u­lat­ing busi­ness are
left up to the states only, and all forms of reg­u­la­tions vio­late the
Con­sti­tu­tion This is dis­cussed in great
detail by James Madi­son in Fed­er­al­ist 45.

Capitalism has very much become the boogieman amongst progressives.  It has been blamed for causing mass poverty, destroying the environment, and so many other evils in the United States. 

Corporations are an even bigger boogieman than capitalism for progressives,  They’ve become the number one villain in movies and tv series produced by ultra-liberal Hollywood.

Capitalism deserves none of the blame for the evils that exist in the American economy, and corporations deserve only a partial blame.  This is  because for the past many decades the economy of this country has been a corporatist economy rather than a capitalism  economy.  Here is how the Merriam Webster online dictionary defines corporatism:

the organization of a society into industrial and professional corporations serving as organs of political representation and exercising control over persons and activities within their jurisdiction.

In a corporatist economy the government and the corporations are deeply in bed together.  The corporations contribute enormous sums of money to politicians who write laws and regulations that benefit corporations. The corporations grow larger and more wealthy allowing them to contribute more money for the writing of more laws and regulations. The end result is that a particular corporation achieves a monopoly in a given industry allowing them to raise prices and provide substandard service without fear of competition.

Crony capitalism is another name for corporatism.  Thanks to ObamaCare and so many other laws and regulations, healthcare is one industry ruled by corporatism.  This is documented in this Mises Wire article Do We Have a Free-Market Medical System?

I think the most apt description would be “crony capitalist” medicine, one in which powerful special interests conspire with government officials to create legally mandated monopolies, with the specific goal of thwarting free market competition.

The author of the article goes on to say how free market capitalism would solve these problems caused by crony capitalism.

In a genuine free market system, prices reflect the decisions of consumers. Producers who solve significant problems are rewarded with high prices and profits. High prices and profits in turn attract lots of competition. The competition not only prevents monopoly. It also improves quality and very importantly increases supply, which is the only sustainable way to reduce prices. Consumers then get better medicine and ever lower prices. Producers dislike competition, and therefore try to buy government help in manipulating or fixing prices.

There are powerful lobbying groups that exist solely for purpose of ensuring that politicians continue to create an environment that favors large corporations.  The Mises article Chamber of Corporatism discusses this in great detail.

Chambers and other lobbying arms of the business community are in the game of socializing their costs and privatizing their profits. Naturally, these groups will seek to lower taxes on their profits, for example, but they will often enthusiastically support statewide income taxes or sales taxes that will cost the larger population plenty, but will disproportionately benefit business groups.

Free Market Capitalism, which built the United States into the most prosperous and freest nation, is far superior to corporatism  Here is how capitalism is defined by the Merriam Webster online dictionary

an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

Capitalism has often been decried by progressives because they claim that system functions on greed.  Milton Friedman answers that criticism in the transcript from this video

Well first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.

Progressives have also decried capitalism because it produces an unequal distribution of wealth.  That criticism was answered by Milton Friedman in Free to Choose: A Personal Statement

In the past century a myth has grown up that free market capitalism—equality of opportunity as we have interpreted that term—increases such inequalities, that it is a system under which the rich exploit the poor. Nothing could be further from the truth. Wherever the free market has been permitted to operate, wherever anything approaching equality of opportunity has existed, the ordinary man has been able to attain levels of living never dreamed of before. Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those societies that do not permit the free market to operate. That is true of feudal societies like medieval Europe, India before independence, and much of modern South America, where inherited status determines position. It is equally true of centrally planned societies, like Russia or China or India since independence, where access to government determines position. It is true even where central planning was introduced, as in all three of these countries, in the name of equality.

Corporatism on the state or local level produces negative results.  This is nothing compared to the negative effects produced by corporatism on the federal level. Laws and regulations on the federal level benefiting corporations should not exist at all.  Any laws regulating business are left up to the states only, and all forms of regulations violate the Constitution   This is discussed in great detail by James Madison in Federalist 45.