Tuesday, November 3, 2009

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.

Copyright 2009 EPJ Group LLC


  1. Michael,

    Well done. For more on defining capitalism I suggest David King's "Guide to Objectivism" especially this section:

    http://www.mega.nu:8080/ampp/www.geocities.com/athens/olympus/7695/chaptr04.htm#58 (mirror I found for the original which has been removed from Geocities)

  2. Thank-you. May I have another?

    Seriously, would you consider cross-posting this?

  3. Capitalism has no means to prevent the creation of fraudulent products up front - instead we would have to rely on the discovery that products are fraudulent and gradual shift of consumers away from said products, slowly starving the guilty companies until they die off.

    That discovery process is the sticky point, however, as the media and its captured journalists offer only "grey" reporting (present two sides, make no mention of whom you feel is telling the truth, cut to paid commercials).

    The goal of regulation is to have folks who can catch fraud up front and stop it from continuing for very long. Where does fraud and corporate manipulation fall within your two models?

    Your version of corporatism seems to be only focused on the act of taking money from the general good and passing it on to favored companies, but does not mention whether corporatism includes regulation(?)

    Is there a form of capitalism that includes external regulation that is not capture-able?

    1. There is no system or government or commerce that is immune from corruption, because there will always be flawed individuals willing to abuse whatever system is in place. The only real choice is between the self-correcting free market, government coercion, or some blend of the two. So long as the government acts strictly as referee and remove cheaters from the marketplace, some regulation benefits the consumer. When government has enough power to choose winners and losers, it becomes a magnet for those who would game the system for their own personal enrichment, and the consumer suffers.

  4. TommyTek,

    The goal of regulation is actually to hinder innovation from smaller firms and restrain the normal competitive process of the marketplace.


  5. You're all very kind, thank you.

    Is "cross posting" something I would do or Robert Wenzel?

  6. Used your article for a blog great piece I added this video


  7. If only you could explain the same for socialism and communism, these are equally missed used.

    1. The best way to illustrate the differences between capitalism, socialism and communism is to follow where the product of the labour of the working citizen goes.

      In Capitalism, you work and that work produces some product. You get to keep some fraction of that product, and the rest (the surplus value) is taken by your employer. Some fraction of the surplus value may go to the state in the form of taxation to help pay for the needs of society.

      In Socialism, the middle-man is cut out. The working citizen keeps a greater fraction of their product, and the surplus value goes directly to the state. Now since there's no employer to take a huge slice of your surplus value, both you and the state benefit by getting more out of your work.

      In Communism, the entirety of the product of your work goes directly to the state, which together with the rest of the product of the working class, gets partitioned out as is deemed necessary (compensation to the workers, and the general needs of society).

    2. There's no State in Communism/anarcho-communism. What you refer as Communism is in fact Marxist Socialism. You cannot say you achieved Communism if you have not abolished State as social structure.

  8. If capitalism is a social system then the definition " the patterned series of interrelationships existing between individuals, groups, and institutions and forming a coherent whole" would apply to everyone within a community or some outline boundary. I don't believe that one can say capitalism is a social system but rather an economic system. An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society. According to the "experts" capitalism is system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. So by definition capitalism is private ownership for private profit. In my opinion it necessary to distinguish between the two.

  9. To quote the author:
    "Arguing with some very easily becomes futile, hellishly so."
    A very useful phrase to describe Moore and his ilk would be: invincibly ignorant!

  10. Wrong. Corporatism has nothing to do with business corporations but rather uses the root Latin word corpus (body) where workers are represented by their group to negotiate wages and such. What most people call corporatism (international command-market economy) is actually the opposite of corporatism. It was formed in opposition to socialism so people could keep their private property. What you described fails to mention that and actually says the opposite of that which is wrong.

    1. So workers dictate wages in a corporation by representation? Are you referring to a workers union within a corporation? How can a response to socialism be classified with "corporatism" as in a body of people keep their property? Wouldn't that be classified as communism?

    2. I wonder what all you would be willing to regard as aggression or as "physical force", because I think people like most "objectivists" do not regard something like noise to be a force that can be used as an act of aggression. If not, it's a serious oversight about how rights can be violated. Noise relies upon physics and when noise of some kind is used to deliberately target someone to disrupt their freedom to think and live a peaceful life, this is a violation by means of a physical force, one used against one's physical senses, one's hearing. For instance, if you had an idiot neighbor who knew what time you went to bed each night and he decided to roar past your house on a Harley at that time specifically in order to disturb you so you can't sleep, this would be an act of aggression. However, I don't think that most people who argue against the use of force consider such a possibility that this would indeed be a violation of individual rights. Physical force is physical force, regardless of the physics of it though, even if it is the use of sound to harass and interrupt someone's freedom. It's still physics and physics being used as an instrument of coercion.