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"Corporatism" is the Latest Hysterical Right-Wing Accusation

The secret history of a smear

Keystone/Hulton Archive/Getty Images

Right-wing critics have a new favorite word to malign President Obama’s economic policies: corporatism. Naturally, it’s an ugly word. Whether it evokes Benito Mussolini’s fascist Italy or just an image of the rich growing richer through government collusion, it’s a vision nobody would defend. Nobody is for corporatism.

Starting with Tim Carney’s 2009 book Obamanomics the idea that Obama is either consciously or accidently enriching the well-off has become a conservative meme. The right-wing blogosphere uses it, as does conservative intellectual heavyweights like Yuval Levin. Thus liberal readers were surprised the other week to learn that the contraception mandate in health-care reform was “corporatist.” Likewise, it may have been news to you that the Dodd-Frank financial reform overhaul—the one Wall Street is perpetually fighting against—is a corporatist sop to the big banks. The Federal Reserve’s efforts to move the economy closer to something like full employment? Yet more corporatism. Ditto both the stimulus and cap-and-trade.

The “corporatism” meme is more than just another refrain for the professional right and their noise machine. In fact, it is a subtle but fascinating bit of ideological work. Talking about corporatism flags worries about power and abuse that everyone shares, allowing conservatives to claim the mantle of the populist movement. But at the same time, the folks currently flinging around the term use it to mask their doubling down on the ideology embraced by the populists’ foes: a three-legged stool of laissez-faire economics, liberty of contract, and hard money. As the historian Charles Postel notes, these current elements also formed the reactionary 19th century counterrevolution that populism and progressivism had to overcome. They also explain why the idea of any type of left and right convergence in fighting government corruption is unlikely to happen.

Behind every current right-wing invocation of corporatism is the assumption that the market would work perfectly fine if the government simply just got out of the way. Corporatism goes beyond invocations of corruptions. Whatever problems exist, it must exist as a result of the government existing and trying to do something. This vision of laissez-faire assumes a free-floating market system, one whose logic is dangerous to challenge.

Sadly, markets don’t always work, nor will they always solve society-level problems. That’s why conservatives who call cap-and-trade, for instance, corporatist, are missing the entire picture—which is how do we best deal with the onset of global warming? To point out that correcting market failures benefit some parties versus other parties is self-evidently true. The question is how do we choose to correct the problems markets can generate, rather than assuming they are entirely the fault of those trying to address them. This critique turns a blind eye to the actual problems we are trying to solve.

This blindness shows up even more closely when you consider how corporatism turns out to be present anywhere an economic transaction is regulated. Why did Carney, for instance, flag the contraception mandate as a form of corporatism? Because of the proposition that a “person gives up his First Amendment rights when he is acting as a businessman.” Because some businesses want to do one thing, regulating their actions only benefits others who already wanted to do those things.

This is, of course, the same logic of “liberty of contract” that was used to defeat numerous attempts to regulate the private market during the populist and progressive eras, best exemplified by the Lochner-era court that ended during the New Deal. As Judge Rovner wrote in her Seventh Circuit dissent in the case involving the contraception mandate, this case “is reminiscent of the Lochner era” because employers could claim that providing protections to workers was “infringement on the freedom of contract and the right to operate a private, lawful business as the owner wished.”

The pre-FDR court ignored the way that workers themselves might not have the bargaining power that would allow them to pursue their own liberty; by invalidating laws on these terms, they were depriving them of the same rights. Meanwhile, the government has a legitimate right to promote the general welfare and to guard the public health and safety.

Market failures and the need to provide for the common good are important, but the other important ideological innovation of the progressive era wasn’t that liberty of contract and laissez-faire were wrong, or not important. It was that they were incoherent. Contracts themselves, and the markets that evolve out of them, are created and limited through political power. There’s no way for the government to get out of the way. Between enforcing contracts and setting the contours of trade through an extensive web of tax, bankruptcy, corporate, property, and liability laws, the government creates the conditions for a modern capitalist economy.

The liberty of contract people want to elevate the daily affairs of corporations to constitutional status by treating businesses as the embodiment of their owners. But they aren’t—they are legal creations, formed and enabled by the law. All contracts, since they are enforceable through the public courts, are like mini-forms of public power, and thus are accountable to the public. As the progressive legal realist Robert Hale wrote, all private contracts are a form of “law-making by unofficial minorities.” If public power’s involvement in contracts is corporatism, then the entirety of capitalism and the last several centuries of property rights are corporatist through and through.

This becomes clearer the more you watch conservatives trying to declare various things to be on the good or bad side of corporatism. Ron Paul calls the idea that large online retailers should pay state taxes like local businesses “corporatism” between big business and government. But how is the reverse of taxing local businesses and not large national ones any less about picking winners and losers? Carney refers to Bill Gates and Warren Buffet as the good type of oligarchs because they are non-corporatists, but it’s impossible to imagine their wealth without elaborate systems of intellectual property protection or limited-liability corporate structures. The idea that these market structures happen naturally, so there’s some liberty of contract to point to guide us, instead of through a political process ideally balancing concerns about fairness, growth and efficiency, shows how deliberately blind this entire critique is to our actual economy.

The third leg of the reactionary stool, hard money, has also seen a resurgence of right-wing interest throughout the past five years. Hard money isn’t just about conservatives being quite willing to nail William Jennings Bryan to a cross of gold, but it’s also the more general conservative project of discrediting the entire idea that the short-term economy is something the government has a responsibility to manage.

There’s been an all-out assault to portray the three main levers the government has - fiscal, monetary and housing policies - to deal with the Great Recession as corporatist insider dealing. Instead of a depicting the stimulus as a project that had bipartisan support from economists, one that provided both an economic boost and much needed investment when interest rates were at record lows, conservatives have portrayed it as ground zero of the corporatist agenda. The Tea Party was originally founded on the idea that housing remedies were unfairly supporting the losers, and that waves of foreclosures would reward the prudent instead of dragging them down too. But the criticism aimed at the Federal Reserve has been the angriest of the three. Monetary policy is consistently described as both punishing savers while also rewarding the rich; bailing out struggling, underwater homeowners while also giving a sweetheart deal to Wall Street.

The hidden assumption is that all efforts to fight the recession are necessarily corrupt and illegitimate, with a darker underlying message that the recession is doing the hard work of purging out the weak. The idea that prolonged mass unemployment, leaving workers with weak bargaining power and corporations with high profits is the most vile form of corporatism and coercion over everyday working people somehow never gets mentioned.

There won’t be any left-right convergence on how to fight corruption as long as the concept of corporatism is hiding a reactionary agenda behind its mask. The netroots left and the libertarian right made big waves about the possibility of teaming up to oppose President Obama’s “insider” “corporatist” agenda back in 2009. One of the few victories of this was an audit of the Federal Reserve’s emergency lending facilities passed into law. But instead of using a small but important victory to build onto new goals and expand a movement, the left wanted to know why the Federal Reserve wasn’t doing more to jail bankers and boost the economy while the right demanded harder money. There was simply no place to go next, as one side wants to use the government and the other wanted to bury it.

The core right-wing ideology reappears when any effort is made to shelter something from the market. If corporatism is such a bad thing, then focusing more plainly on public ownership should be a way out. Indeed some of the most striking corporate favors lately are the result of the mass privatization of civic infrastructure like roads, bridges, schools, and parking meters. Yet the right is quiet on this. Crucially, they don’t join efforts by the left to paint these kinds of measures that slowly bleed the state as terrible versions of cronyism and corporatism.

This is in no way meant to downplay the serious challenges of corruption and hijacking of public policy by elites and the rich in this country. What it does mean is that liberals will need their own language for how to combat these problems. This language will need to be focused on public accountability, collapsing the distance between those with power and those who are impacted, choosing how politics will be structured by political power, and equality. What it won’t mean is using the fact that political power is everywhere, and everywhere a challenge to reform, to retreat into a reactionary fantasyland of how the world works that was already an anachronism by the time the right-wing used it to delay the arrival of the modern state a century ago.