2015 – 136 Explaining the Difference Between Capitalism and Corporatism

Explaining the Difference Between Capitalism and Corporatism to Michael Moore

By Michael Labeit

The primary trailer to Michael Moore’s latest hideously unwatchable “documentary” Capitalism: A Love Story features a narration of a series of events surrounding the financial crisis beginning in late 2008 and the federal government’s particular method for addressing it with Moore ultimately proclaiming that “By spending just a few million dollars to buy Congress Wall Street was given billions.” No arguing with that proposition.


After just 22 seconds time Moore takes us to Rep. Marcy Kaptur (D) of Ohio who laments the fact that

“Everything was being handled by the Treasury Secretary from Goldman Sachs…they [influential Wall Street firms] had Congress right where they wanted them…this was almost like an intelligence operation.”

Again, touché madam. Immediately after Kaptur’s last words evacuate her, the screen swings to an unidentified man in front of a Condo Vultures logo who asserts categorically that “this is straight up capitalism,” an assertion that ends up sounding – perhaps inadvertently – like a conclusion, one inferred, consciously or not, from the previous claims within the trailer. It is here where our brief search for the nonsense ends.

I cannot possibly recount how many times I have encountered this ubiquitous fusion, one that is pervasive but usually implicit, embedded within both the makeshift and prepared arguments of academics, pundits and politicians. Moore invites us to commit it ourselves.

It’s the error of mistaking corporatism for capitalism.

I find myself having to identify and explain the fundamental differences between capitalism and corporatism incessantly to everyone from shout-and-holler Bill Moyer lovers to scandalously sloppy PhD professors. Unfortunately, I tend to come across people, thanks to both misinformation and disinformation from school and the media, who are staggeringly impenetrable to valid, logical demonstrations. Arguing with some very easily becomes futile, hellishly so. Nevertheless, the distinction between capitalism and corporatism exists and it must be made public.

What is Capitalism?

Defining our terms is the first step we must take in order to prove capitalism/corporatism unionists wrong. Capitalism is a social system based upon the recognition of individual rights, including private property rights where all goods, both intermediate goods and final goods, are owned privately. The “rights” referred to above are ethical-legal principles that identify and sanction man’s freedom of action strictly within a social context.

Under capitalism, each individual possesses the legally unalterable authority to support and sustain himself, to conduct himself in accordance with his own independent judgment, to control the material product of his mental and/or physical labour, and, in connection with these rights, each and every individual has the legal authority to be free from the initiation of physical force. The initiation of physical force, also known as aggression, refers to any act that disturbs or upsets the soundness or cohesion of a non-aggressor’s body, his property, or ownership of his property. A man must think and act in order to survive; his survival requires both mental and physical activity. Rights recognize and sanction man’s freedom to proceed with thinking and acting in his self-interest. Only the initiation of physical force can frustrate another’s attempt to take those actions condoned by his rights. A man is prevented from exercising his rights only from the coercion of another. Murder, assault, vandalism, and theft are apt examples. Such actions and all other examples of aggression are illegal under capitalism, period. Accordingly, all relationships under capitalism must be formed voluntarily between consenting adults.Furthermore, this absence of aggression that exists under capitalism allows for the formation of the free market, the vast network of voluntary exchanges of property titles to intermediate and final goods.

Government intervention is yet another exemplar of initiated force since it is the use of aggression to fulfill certain socio-economic objectives. As such, it contradicts the essential nature of a capitalist economy as a non-aggressive economy. An economy remains capitalist so long as the government, or any other agency for that matter, refrains from intervening coercively in the peaceful private lives of citizens. The implications of this fact are substantial: under pure capitalism there are no taxes, no price ceilings, no price floors, no product controls, no subsidies to either the rich or the poor, no public streets, no public schools, no public parks, no central banks, no wars of aggression, no immigration restrictions, etc. Government neither resorts to aggression under capitalism nor does it sanction its use by others, end of story.

What is Corporatism?

Corporatism shares no such description. It is a social system where the government intervenes aggressively into the economy, typically with political instruments that benefit large corporations and enterprises to the detriment of smaller businesses and private citizens. Such instruments include subsidies, tariffs, import quotas, exclusive production privileges such as licenses, anti-trust laws, and compulsory cartelization designs. All involve the initiation of physical force: subsidies come from taxes, tariffs are taxes, import quotas restrict trade, license schemes prohibit non-licensed producers from producing certain goods, anti-trust laws allow competitors to gain or retain market share through legal competition in court, and compulsory cartelization speaks for itself. Economists David Gordon and Thomas DiLorenzo elaborate well on the less-than-pleasant nature and history of corporatism and economic fascism here and here . Read Murray Rothbard’s analysis of government intervention for further reference here.

Similar to socialist governments, corporatist authorities seize control of land and capital goods when they feel it is necessary to do so without regard for private property rights. However, unlike socialist governments, corporatist states usually do not formally nationalize private sector firms, choosing instead to assume de facto control over them rather than de jure control. This difference however is procedural, one of style, not of essence, making it superficial – ancillary at best – and therefore fundamentally useless as an argumentative tool of fascists and socialists to distance themselves from each other. Corporatism is a system of institutionalized aggression. Between the complementary terms “capitalist” and “non-capitalist,” corporatism finds itself comfortably within the latter.

This means that the latest attempt by the federal government to save the financial industry by subsidizing failed or failing institutional investors and banks is an illustration of a corporatist, not a capitalist effort. Market forces have nothing to do with the Troubled Asset Relief Program or the misleading “American Recovery and Reinvestment Act of 2009.” These Congressional gems do not present themselves as intellectual dilemmas for capitalists, for advocates of the free market – not whatsoever. Under capitalism, firms that do not satisfactorily satisfy consumer demand are made promptly to surrender their assets and their business influence. Financial capital is siphoned away from these unproductive enterprises and allocated toward those who have proven themselves capable of taking up the mantle of “producer.” I want at this moment to intrude the name Ludwig von Mises, the man who bluntly argues in his text Human Action that

Ownership of capital is a mandate entrusted to the owners, under the condition that it should be employed for the best possible satisfaction of the consumers. He who does not comply with this imposition forfeits his wealth and is relegated to a place in which his ineptitude no longer hurts people’s well-being.
Conversely, the kinds of legislative bills, laden with underhanded plots to subsidize various politically-connected businesses and undertakings, which see the desk of our current president, and have appeared before to his immediate predecessor, are political tools meant deliberately to obstruct the operation of this most capitalistic profit and loss mechanism. Call it what you’d like but you may not call it “capitalism.” If you find yourself cursing the wretched collaboration of businessmen and statesmen, by all means proceed. I welcome it. However, if that’s the case it is not the free market system that you find so reprehensible.

A Plea for Scrupulousness

So as we see, the implicit argument made within Mr. Moore’s trailor, if it may be designated as such, is a non-sequitor. “Bailouts, influence by Wall Street firms, ergo capitalism” is not even worthy of scrutiny. The intended fulcrum of the argument has nothing whatsoever to do with the inference. Its poor quality is as flagrant as its careless ambitiousness; it reeks, with few reservations, of a willingness to jump to conclusions. Such casual “reasoning” is enough to put me on my guard and tells me what to expect from the rest of the film.

It all boils down to diligence versus sloppiness. To put it vulgarly, capitalism is not whatever America has, or whatever Washington does, or whatever the rich do. It has a very specific identity, as does corporatism. Failing to discriminate between the two makes it that much easier for the government to further extend its authority beyond already breached Constitutional bounds. Crises make for serendipitous occasions for propagandists and pseudo-intellectuals. An economically inclined public can hedge against this menace.

“Capitalism!?! Say that again, would you.”

-Von Mises, Ludwig. Human Action. 4th ed. Irvington: Foundation for Economic Education, 1996. Print.

Michael Labeit is an economics major, a disgruntled army reservist, an aspiring freelance writer, and an amateur logician. He currently resides in the People’s Republic of New York City and can be reached at logician179@yahoo.com

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