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 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 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.