The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Author’s Preface
• Interventionism
• Introduction
• 1.: The Problem
• 2.: Capitalism Or Market Economy
• 3.: The Socialist Economy
• 4.: The Capitalist State and the Socialist State
• 5.: The Interventionist State
• 6.: The Plea For Moral Reform
• I.: Interference By Restriction
• 1.: The Nature of Restrictive Measures
• 2.: Costs and Benefits of Restrictive Measures
• 3.: The Restrictive Measure As a Privilege
• 4.: Restrictive Measures As Expenditures
• II.: Interference By Price Control
• 1.: The Alternative: Statutory Law Versus Economic Law
• 2.: The Reaction of the Market
• 3.: Minimum Wages and Unemployment
• 4.: The Political Consequences of Unemployment
• III.: Inflation and Credit Expansion
• 1.: Inflation
• 2.: Credit Expansion
• 3.: Foreign Exchange Control
• 4.: The Flight of Capital and the Problem of “hot Money”
• IV.: Confiscation and Subsidies
• 1.: Confiscation
• 2.: The Procurement of Funds For Public Expenditure
• 3.: Unprofitable Public Works and Subsidies
• 4.: “altruistic” Entrepreneurship
• V.: Corporativism and Syndicalism
• 1.: Corporativism
• 2.: Syndicalism
• VI.: War Economy
• 1.: War and the Market Economy
• 2.: Total War and War Socialism
• 3.: Market Economy and National Defense
• VII.: The Economic, Social, and Political Consequences of Interventionism
• 1.: The Economic Consequences
• 2.: Parliamentary Government and Interventionism
• 3.: Freedom and the Economic System
• 4.: The Great Delusion
• 5.: The Source of Hitler’s Success
• VIII.: Conclusions
• Reading References

1.

Corporativism

Corporativism1 is a program, not a reality. This has to be stated at the very beginning to avoid misunderstandings. Nowhere was it attempted to translate this program into actuality. Even in Italy, in spite of the constant propaganda talk, nothing has really been done to establish the system of the corporative state (stato corporativo).

It has been attempted to characterize the different political and economic ideologies as peculiar to certain nations. Western ideas have been contrasted with the German and Slavic ideas; a difference was supposedly discovered between the Latin and the Teutonic mentality; particularly in Russia and Germany there is talk of the mission of the chosen people which is destined to rule the world and to bring it salvation. In view of such tendencies it is necessary to emphasize that all political and economic ideas which dominate the world today have been developed by English, Scottish, and French thinkers. Neither the Germans nor the Russians have contributed one iota to the concepts of socialism; the socialist ideas came to Germany and Russia from the West just as did the ideas which many Germans and Russians today stigmatize as Western. The same is true of the program of corporativism. It stems from English guild socialism and it is necessary to study the writings of this today almost-forgotten movement in order to obtain information about the basic ideas of corporativism. The Italian, Portuguese, and Austrian publications, party programs, and other commentaries concerning the corporative state lack precision of meaning and avoid exact formulations and statements; they gloss over the real difficulties by making wide use of popular slogans. The English guild socialists, however, show more clarity in the presentation of the program, and Sidney and Beatrice Webb have given a complete statement of the aim and operation of this system.2

In the corporativist utopia the market is replaced by the interplay of what the Italians call corporatives, that is, compulsory organizations of all people engaged in a certain industry. Everything that concerns this industry only, that is to say, the internal affairs of the individual corporatives, is handled by the corporative itself without interference from the state or from persons not belonging to the particular corporative.3 The relations between the different corporatives are regulated by negotiation between them or by a joint conference of representatives of all corporatives. The state, that is the parliamentary body elected by general vote and the government responsible to it, does not intervene at all, or only when the corporatives fail to reach an agreement.

In drawing up their plans the English guild socialists had in mind the pattern of English local government and its relation to the central government. They proposed creating self-government of the individual industries. Just as the counties and cities take care of their own local affairs the individual branches of production would administer their internal affairs within the structure of the whole social organism.

But in a society which is based on division of labor there are no internal problems of individual businesses, enterprises, or industries which would concern only those connected with such businesses, enterprises, or industries and would not also affect the other citizens. Everybody is interested in seeing that each single business, enterprise, and industry be run as efficiently as given conditions permit. Every waste of labor and material in any industry affects each individual citizen. It is impossible to leave the decisions over the choice of production methods and of the kind and quantity of the products solely to those engaged in an industry because such decisions concern everybody, not only the members of the vocation, the guild, or the corporative. While the entrepreneur of the capitalist economy is boss in his own business he nevertheless remains subject to the law of the market; if he wants to avoid losses and to make profits he has to endeavor to fulfill the wishes of the consumers as well as possible. The corporatively organized industry which would not have to fear competition would not be the servant but the master of the consumers if it were free to regulate at will the internal problems which supposedly concern it exclusively.

The majority of the proponents of the corporative state do not want to eliminate the entrepreneurs and the owners of the means of production. They want to establish the corporative as the organization of all individuals engaged in a particular line of production. Disputes between the entrepreneur, the owners of the capital invested in the industry, and the workers concerning the disposition made of gross profits and the distribution of incomes among these different groups are in their opinion merely internal problems which are to be settled autonomously within the industry without the interference of outsiders. How this is to be done, however, is never explained. If entrepreneurs, capitalists, and workers within a corporative are to be organized into separate groups or blocs, and if negotiations are to be carried on between these blocs, agreement will never be reached unless the entrepreneurs and capitalists are willing voluntarily to relinquish their rights. If, however, decisions are to be made directly or indirectly (by the election of committees) by the vote of all members with each individual having the same voting power, then the workers, being more numerous, will outvote the entrepreneurs and the capitalists and will overrule their claims. Corporativism would thus take the form of syndicalism.*

The same is true of the problem of wage scales. If this thorny question, too, is to be decided by general vote with every individual engaged in the industry having equal voting power, the result will most likely be equality of wages irrespective of the kind of work performed.

In order to have something to distribute and to pay out, the corporative must first have receipts through the sale of its products. The corporative occupies in the market the position of sole producer and seller of the goods which belong to its line. It need not be afraid of the competition of producers of identical goods because it has the exclusive right to engage in such production. We would therefore have a society of monopolists. This need not mean that all corporatives would be in a position to exact monopoly prices; but many industries would be able to exact monopoly prices and to realize monopoly profits of various amounts. The corporative organization of society will therefore give particular advantages to certain branches of production and those engaged in them. There will be industries which by restricting production will be able to increase so considerably their total receipts that those engaged in this industry will have a relatively larger share in the total consumption of the country. Some industries may even be able to achieve an absolute increase in consumption for their members despite a fall in total production.

This is sufficient to establish the shortcomings of the system of corporativism. The individual corporatives do not have any motive to make their production as efficient as possible. They are interested in reducing the output so that they may realize monopoly prices; it depends on the state of demand in the particular industry whether those engaged in the one or in the other corporative will fare better. The position of the corporatives will be the stronger the more urgent the demand for their products; the urgency of the demand will make it possible for some of them to restrict production and still to increase their total profit. The entire system would eventually lead to an unrestricted despotism of the industries producing goods which are vital in the strict sense of the word.

It is hardly to be believed that a serious attempt would ever be made to put such a system into actual operation. All proposals for a corporative system provide state intervention, at least in the case that an agreement cannot be reached between the corporatives in matters concerning several or all of them.4 Among these matters prices certainly have to be included. It cannot be assumed that an agreement on prices could be reached between the corporatives. If the state has to intervene, however, if the state has to fix prices, then the whole system loses its corporative character and becomes either socialism or interventionism.

But the price policy is not the only point which shows that the corporative system cannot be made to work. The system renders all changes in the productive process impossible. If demand has changed or if new production methods are to replace the old ones, capital and labor have to be shifted from one industry to another. These are questions which exceed the limits of a single corporative. Here an authority superior to the corporatives has to intervene and this authority can only be the state. If, however, the state is to decide how much capital and how many workers each individual corporative is to employ, then the state is supreme, not the corporatives.

[1. ]Corporativism—the name given to the particular Italian brand of economic organization (economia corporativa; in German, Staendestaat) proposed during the Mussolini era. [Corporativism was to grant complete autonomy to every branch of business or “guild,” with absolute authority over its own internal affairs, wages, hours, production, and so on. Matters affecting other businesses were to be settled by inter-guild arbitration or government ruling. Such an arrangement is unrealizable and, therefore, was never implemented. For further details, see Mises’s Human Action (2nd–4th and Liberty Fund eds., pp. 816–820); also alphabetical entry in Percy L. Greaves, Jr.’s glossary in the Liberty Fund edition.—Editor]

[2. ]See Sidney and Beatrice Webb, A Constitution for the Socialist Commonwealth of Great Britain (London, 1920).

[3. ]This the Webbs call “the right of self-determination for each vocation,” p. 277ff.

[* ][Syndicalism—a movement of workers who sought to transfer to themselves the shares of entrepreneurs, owners, and capitalists in their particular industry, so that they, the workers, would own and operate the business. Their rallying cries, “The railroads to the railroadmen,” “The mines to the miners” revealed their goals. For clarification, see Mises’s Human Action (2nd–4th and Liberty Fund editions, pp. 814–816); also alphabetical entry in Percy L. Greaves, Jr.’s glossary in the Liberty Fund edition.—Editor]

[4. ]Cf. Mussolini’s speech in the Italian Senate on January 13, 1934.