Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“Seems to be a deep instinct in human beings for making everything compulsory that isn't forbidden.”     Robert A. Heinlein,    The Moon is a Harsh Mistress

May 23, 2007

Mercantilism, Fascism, Corporatism — And Capitalism

by Brad Warbiany

In politics, language is crucial. When different sides of a debate use the same term in different ways, the entire debate becomes fruitless. When terms for different ideas are thrown around as if they’re identical, the debate becomes muddled. It’s even more difficult to understand when people on the same side of the debate use terms differently.

Recently I’ve been listening to Free Talk Live quite a bit, and have enjoyed it greatly. The hosts are Ian, an anarchist (although he calls himself a “free marketeer, choosing to leave the baggage caused by misuse of the term anarchy behind), and Mark, who would best be described as a small-government Republican, in the RLC bent. They put on an entertaining show, but when it comes to economic matters, they get deep into the muddled mess of ill-defined terms. They use the terms mercantilism, fascism, and corporatism quite interchangeably. They further use mercantilism as their default term for what would be much more accurately termed corporatism. In the interest of clarifying the debate, here’s a basic rundown of what we’re talking about.

Mercantilism

Mercantilism is separated from corporatism and fascism simply by its nature. Corporatism and fascism are political systems. Like capitalism, mercantilism is an economic theory. Mercantilism is a theory that the wealth of a nation is based upon its ability to amass gold and silver (and other valuable “money”), and thus a nation who exports more than it imports will be getting richer and richer every day. Of course, this theory on the wealth of nations was debunked rather thoroughly by Adam Smith in The Wealth Of Nations.

Mercantilism usually requires government intervention to be truly practiced. But mercantilism isn’t about regulation, or government sticking its hand into domestic industries. It is primarily a theory that discusses such things as balances of trade, and in the modern area, ideas of “dumping”, devalued currencies, and outsourcing. Though Adam Smith debunked the theories of mercantilism, and economists ever since have taken an exacto knife to the remaining pieces, mercantile thinking still resonates with the masses. Like many popular theories, it may not be right, but to a lot of people it “sounds” right.

To confuse it with corporatism or fascism, however, is mistaken.

Corporatism and Fascism

I place these two together because there are many similarities. They’re both political systems based on widespread government intervention and planning in the economy. They’re both seen as a bit of a third-way between capitalism and socialism, with corporatism seemingly nearer to capitalism, and fascism seemingly nearer to socialism. There are a few main differences though, most notably that fascism is a complete political system, whereas corporatism mainly deals with economic matters. But the biggest difference is who is pulling the levers of central planning, and for what purpose.

Fascism is a political system where individual interests are subservient to those of the state. In fascism, this occurs in all spheres of life, but this post deals purely with the economic. As I mentioned, fascism involves extensive central planning. It doesn’t abolish private property, but it drastically curtails the scope of property rights. Property can be used by owners for all “approved” state purposes, and only for those purposes. Venezuela, for example, would be more of a fascist state than a socialist state. But the key point of fascism is that it is an authoritarian state where the needs of the individual or corporation are subservient to those of the state. It is the politicians who are pulling the levers, and they’re doing it for national honor.

Corporatism, on the other hand, is a political system dominated by corporate interests with the stated goal of improving the economy. Individual rights are a little more widespread, but economic liberty is curtailed to ensure smooth and planned economic growth. While many would consider eminent domain cases like Kelo to be “fascist”, it’s more accurate to describe it as corporatist, as it involves economic actors pushing government into violating individual rights to promote business interests. America would be an example of a true corporatist state, where high-dollar business interests get politicians to write regulations friendly to their interest and punishing their competitors, under the false front of “protecting the consumer”. The businessmen pull the levers, for their own interests.

Corporatism and fascism have similarities, in that both involve widespread government intervention into an economy, but the former involves businesses controlling politicians for business interests, and the latter involves the politicians controlling business to further state interests.

Capitalism

Capitalism is neither mercantilism, corporatism, or fascism. Capitalism is an economic theory based upon the free exchange of goods and services. As a political system, capitalism thrives with almost no political interference at all. In fact, the big debate amongst libertarians is whether or not government itself is even necessary to keep a capitalist system afloat. But I think everyone would agree that capitalism and strong government are almost never found together. Most capitalist systems, when paired with strong government, devolve into corporatism. In fact, it is America’s descent into corporatism that has caused so many people to believe that capitalism and corporatism are the same thing.

In politics, we’ve let a situation fester for years where words mean different things to different people. That’s dangerous; a politician can say one thing and it’s heard by different people to have different meanings. Thus, politicians love to muddy the waters. Let’s make sure that words have meanings, and so let’s try to agree on them and use them properly.

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6 Comments

  1. Brad,

    America would NOT be a corporatist state by any means. The fact that corporatism is one of the elements of economic politics in this country is subsidiary to the nature of the representative republic.

    So long as their are representatives to influence, those with money (including corporations) will do so.

    Japan would be a near perfect example of a mercantilist, corporatist state.

    Comment by Chris — May 23, 2007 @ 4:48 am
  2. Brad,

    I thought Mercantilism actually was a thriving economic system during the 15th, 16th, and 17th centuries.

    Comment by VRB — May 23, 2007 @ 8:10 am
  3. I think you got the “former” and “latter” mixed up in your distinction between corporatism and fascism. I could be wrong but read it again and make sure.

    you wrote:

    “but the former involves businesses controlling politicians for business interests, and the latter involves the politicians controlling business to further state interests.”

    Comment by John — May 23, 2007 @ 10:50 am
  4. John,

    It looks how I expected… Corporatism being the former, and fascism being the latter.

    VRB,

    Yes, mercantilism was probably the dominant economic theory of that time, but I’m not sure how wildly successful it was. It was superceded by capitalism, though, starting with Adam Smith and others in the second half of the 18th century.

    Chris,

    As I pointed out, capitalism tends to become corporatism when paired with a strong government, particularly one where elections are driven so much by money and advertising. We’re certainly no longer the capitalist bation we once were…

    Comment by Brad Warbiany — May 23, 2007 @ 1:45 pm
  5. Great post Brad.

    I think capitalist businessmen are their own worst enemies. Once they have the ability, they lobby congress to fix the system in their favor and thus set up the corporatist system you describe. Lenin said that “the capitalists will sell us the rope to hang them with.” Unfortunatley, I think he was right.

    Comment by Stephen Littau — May 23, 2007 @ 1:56 pm
  6. Capitalism is an economic theory based upon the free exchange of goods and services.

    Negative. Capitalism is a description an economic situation where an elite owns most of the means of production, and almost everyone else works for them. It has nothing to say about free markets.

    Liberalism is a political theory based on individual liberty, including the free exchange of goods and services.

    It is entirely possible to have a non-capitalist liberal society. It would be a society of small-time landowners and small businessmen, mixed with the occasional syndicate, co-op, labor union, or some other productive enterprise that left the means of production in the hands of workers.

    It is just as entirely possible to have an illiberal capitalist society: China, for instance.

    Liberalism does not need Capitalism.

    - Josh

    Comment by Wild Pegasus — May 30, 2007 @ 1:01 am

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