Chad Perrin: SOB

14 January 2008

political postions on capitalism and corporatism

Filed under: Cognition,Liberty — apotheon @ 05:06

Democratic Party: Corporatism is bad, so capitalism is bad.

Republican Party: Capitalism is good, so corporatism is good.

Ethical libertarians: Free-market capitalism is good, so corporatism is bad.

Related Stances:

Mainstream anarcho-capitalism: Free-market capitalism is good, so government is bad. Corporatism is often assumed to be part of capitalism, and only bad under the aegis of government — which is odd, considering a corporation is specifically a result of governmental management of proprietary rights and economic liability.

Libertarian Party: Free-market capitalism is good, so . . . well. The end of that sentence is probably almost as numerous in its various possible forms as the members of the party.

Explanation:

In Western democracies, government has not been sufficiently divorced from the economic sphere to provide anything approaching a true free market capitalist economy, at least for the most part. The United States came close at one time, but it was not quite successful in that segregation as it should have been at even the best of times. As a result, the corporation as the default business entity in the US economy (and other Western democracies) was essentially unavoidable.

The term “corporation” is not just a synonym for “business”, even if the terms are in practice almost indistinguishable under the current conditions of Western economies (and a fair number of Eastern economies, for that matter) at this point in time. The reason they are so easily conflated is the simple fact that a corporation has something like a strong economic gravity well around it: the more economic power a corporation aggregates, the stronger its attraction to additional economic power. Such a set of conditions leads to corporations quickly dwarfing other business entities in economic power — which translates rapidly into political power at those levels.

This entire state of affairs, however, relies entirely upon the existence of a strong body of corporate law. Without governmental complicity in the creation of the corporation as a business entity, the corporation as a business entity would not exist. Such aggregations of power with ever-growing ability to absorb greater power would not exist as such. Instead, dominant business entities would come from a pool of sole proprietorships, collaborative enterprises, and cooperative endeavors, all of which would be limited in their ability to dominate markets and centralize aggregate power by the lack of the abstraction of the corporate power structure as a facilitator. The resources of these other business entities are inextricably tied to their respective individual owners, whereas those of a corporation are tied only to the power centralization of the very concept of a corporation, insulated from individual human involvement.

Because of the ubiquity of corporations as the dominant business entity under the current interventionist capitalistic economy we all know and “love” (to hate), people tend to find it significantly difficult to differentiate between “corporation” and “generic business entity”. A corporation is a form of business entity, but is not itself the only form of business entity — and in a truly free market economy (one where government does not attempt economic management), the corporation would not exist, by definition.

While a rigorous examination of libertarian ethics would ultimately either make clear the distinction between “corporation” and “business” or lead to a state of unresolved cognitive dissonance, the common illusionment that leads people to view “corporation” and “business” — or, more to the point, “corporatism” and “capitalism” — as synonymous tends to lead even mainstream Libertarian Party and anarcho-capitalists to believe the conclusions of such sloppy thinking. As a result, many self-proclaimed Libertarians (including anarcho-capitalists, who really should know better) are effectively corporatists.

Conclusion:

There is a right answer to this matter, if you believe that liberty and human rights are important (for any reasonable, self-consistent definition of these terms). It is, simply, that free markets are good — and because free markets are good, corporatism is bad.

8 Comments

  1. As I said to you privately earlier, corporatism is a private form of statism. I’ll add, based on your post here, that it’s “private” BUT supported by the complicity of the state.

    Comment by SterlingCamden — 14 January 2008 @ 05:12

  2. Agreed. More precisely, one might say that corporatism is privatized statism — which implies governmental management of an economy within which state functions may be given over in whole or in part to management by business entities.

    Comment by apotheon — 14 January 2008 @ 05:15

  3. An interesting observation, I think (based on other conversations that we’ve had) that you mis-date the birth of the corporation as you define it back to about 1850 or so, give or take a decade or two. I think you missed the penultimate example of “corporatism”, and that is the various East Indies Companies and West Indies Companies. These were “corporations” in the sense that they issued stock, acted as economic “wells” (or “sinks” in a purely topological sense). More to the point, the entire foreign and domestic policies of many countries were centered around these companies. For example, the British Empire fought wars to protect these companies’ interests, and subjugated entire populations. These companies acted as military forces with their own private armies and navies. They governed swaths of land that drawved most European countries in land mass and population size. Yet, only a handful of people profited from them. Their employees got a raw deal, because the government would never take a stance against the companies. The same for anyone else who got in the companies’ way. Like the modern corporate entities, there was a constant flow of personnel, kickbacks, cash, etc. between the companies and the government.

    This pheneomon is not quite as recent as you beleive it is, sadly. It’s been going on for a while.

    J.Ja

    Comment by Justin James — 14 January 2008 @ 08:20

  4. I don’t recall specifying a given date for the advent of the corporation, and I was actually thinking somewhat about the East Indies Company as an example of early proto-corporatism. Mercantilism (the dominant economic model at that time) was, in a sense, the ethic of corporatism without the clearly defined legal structure of it that we see now.

    Perhaps ironically, this sets the roots of corporatism in a theory of economics that held international trade to be a zero-sum game that strictly limited the potential for “winners” vs. “losers”. I suggest this might be ironic because of the fact that many people (who clearly don’t know what they’re talking about) seem to think that corporatism is an integral part of free market capitalism, when in fact the notion of an international economy as a necessarily zero-sum game would be likely met with laughter and derision if posited in the company of modern free market economics thinkers.

    In fact, I’m fully aware of corporate business entities (though not strictly corporations in the modern legal sense of the term) that existed within the context of the Roman empire. Perhaps the oldest commercial corporation in the world dates back to the fourteenth century. What happened in the mid-1800s is that corporations took on a nominally “private” commercial character, thus becoming the dominant form of business enterprise that was not effectively an official pursuer of governmental interests. I can only assume that it is because of the fact that this is the point when corporations started to become the default business structure that you think I must have said something to the effect that this marked the beginning of the corporate business model itself.

    . . . or perhaps the point of confusion that arises comes from the fact that in the United States there was not a strong corporate influence on government during the lag period between the sunset of mercantilism’s power in the colonies with the revolutionary war and the advent of structured legal frameworks for self-incorporating business entities as collective juristic persons. The key was that while economic regulations that pertain to corporations have increased in complexity at an alarming rate since the mid-1800s, the strictness of regulation dropped off sharply when the clear legal framework was put in place allowing a business to incorporate without requiring an individuated legislative act. All the benefits of the corporation as a business structure remained, and the major fetters were removed, by significantly automating the process of establishing a corporate charter.

    Comment by apotheon — 15 January 2008 @ 02:24

  5. The 150 years bit came from: http://techrepublic.com.com/5208-12845-0.html?forumID=102&threadID=248552&messageID=2391479

    specifically: “This is not an indictment of free enterprise, ambition, capitalism, or even large business organizations, mind you. It is a statement specifically about the very particular legal entity known to lawyers as the “corporation”, which has existed in the real world for only about 150 years, and is in fact the dominant economic institution in a fascist state by definition.”

    J.Ja

    Comment by Justin James — 15 January 2008 @ 03:01

  6. That was, unfortunately, some sloppy phrasing. Mea culpa.

    What I specifically meant to refer to there is the post-mercantilist state of corporate business organizations. Fascism involves the interdependence of a particular form of authoritarian government and self-incorporated juristic persons — and that form of the corporate ethic in business did not exist until somewhat less than 200 years ago, as far as I’m aware. Prior to that, corporate business entities existed only by specific state fiat, through an act of legislation or of the Crown (depending on form of government at the time, et cetera). Mercantile corporate bodies did not have the same relationship with the state, and as such did not facilitate the form of government that reached its defining moment in the 1940s known as “fascism”.

    Comment by apotheon — 15 January 2008 @ 05:22

  7. So why do so many people continue to sing the praises of capitalism? Is it a misuse of the term or do they just really not seem to know what they are prosletyzing? I would think think it might be some of both because everyone keeps talking about spreading “democracy” and how we are a “democracy” when we are not spreading such (I think the government in Iraq that we help set up is fairly parlimentary in nature and might count as a republic, as is our own government (at least that is what we are supposed to be)).

    I think we are closer to being fascist (or corporatist, if you like) now then any country has ever been, and as a nation we haven’t given up on empire building/expanding.

    Comment by Joseph A Nagy Jr — 19 January 2008 @ 10:35

  8. Some people know what they’re advocating, but aren’t really aware of the implications of it. Some think they know, but they’re actually advocating something else entirely. Some are just self-centered pricks who will screw over their own grandparents if it’ll get ’em a few bucks, and advocate whatever they think will do them personally the most good right here and now to advocate.

    It’s also worth noting that capitalism and corporatism are neither synonymous nor antonymous. Corporatism, as we see it practiced in North America, is in fact corporate capitalism. Capitalism itself is neither “good” nor “bad” — it’s just a tool. What makes something “capitalism” is the organization of an economy around exchanges of capital. What makes an economy good (and here I run up against differences of opinion with socialists and others who disagree with me) is that it is a free market economy.

    Capitalism itself is essentially nothing more than an abstraction that developed to enable a market economy to scale upward past the scope limits of a pure, direct barter economy. The only form of a free market economy that would be (reasonably) possible at grand scales is, I think, a free market capitalist economy. Note this is not the same as a managed capitalist economy (for instance).

    Just for fun, I quote the immortal words of Oingo Boingo, from the song Capitalism:

    There’s nothing wrong with capitalism There’s nothing wrong with free enterprise

    Comment by apotheon — 20 January 2008 @ 03:31

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