The Return of Corporatism

At the height of the presidential campaign last year around this time, Professor Richard Epstein offered an estimate of his former colleague at the law school at the University of Chicago. Putting aside the razzle-dazzle, Barack Obama, he thought, would be very much a conventional liberal, though tilted even more to the Left, following the drift of his party. But Epstein thought that package of the Left would contain a hefty component of “corporatism.” The starry-eyed youngsters gazing at Obama probably had not the faintest idea as to what “corporatism” might have meant, and even older people, murmuring “yes we can,” had long forgotten, if they had ever known.

Let’s go back then to the days of the New Deal, when “corporatism” was thought to be the new idea, more attuned to the modern age. Instead of a society riven by clashes of interest, with businessmen pitted against workers, everyone would be brought together in common councils. In Europe, the analogy was made to wrapping sticks together in a bundle (“fasces”) making them stronger, when bound together, than they were when separated. Businessmen could collaborate with their competitors, as well with the unions. In that way, they could avoid those “ruinous” cuts in prices that reduced the income of farmers and workers and pushed some owners out of business. Put out of mind, for some reason, was the effect of competition in lowering the price of food, clothing, and heating for consumers during a severe depression.

One story of the time might reveal the nature of the beast: In 1934, Jacob Maged, forty-nine, a tailor in Jersey City, was fined $100 (in 1934 money, remember) and sentenced to three months in prison. His wife and four daughters would have to take over the running of the shop in his absence. And what had he done? Knowingly, deliberately, he had pressed a suit for one of his customers for only 35 cents instead of the 40 cents mandated under the National Recovery Act. And Abraham Traube, president of the Cleaners and Dyers Board, cheered the verdict. He said that it was about time the law was enforced, and “if we did the same in New York City we would soon get the whole industry in line.”

The law was animated by a concern to keep people employed and sustain their standard of living, but it worked by giving people in the same industry the power to bar competition and punish those people who had the temerity to lower prices in the search for more business. These boards were not elected, and yet they could impose their interests on the public with the power of law. It was Aristotle’s classic understanding of the corruption of political power: public authority, power over the whole, was used to impose the private interests of those with power.

The courts would put away the NRA and its works of this kind. And yet, it is ever a temptation on the part of many people to become “rent-seekers,” to have the law require the use of their goods or services. They may press to require insurance policies to cover in vitro fertilization, compel the use of Ethanol in gasoline, impose tariffs on sugar from abroad. The temptation to create new councils, vested with authority, also lingers: we have the plan now to create a commission to determine what kinds of medical care may be supported or barred under a program of medical care run by the government. Justice Scalia once aptly warned that the Constitution gives the Congress the power to make laws – not legislators. But that sense of the moral problem woven in with the Constitution seems to have vanished even from the memory of lawyers and judges.

When the push came on “Hillarycare” sixteen years ago, it was defeated as insurance companies alerted their customers to the costs, and the pharmaceutical industry pointed up the serious dangers in discouraging investment and innovation in that field. But now the insurance companies and “big pharma” – and virtually every other business with a stake in the project – have been co-opted, brought on board the plan for Obamacare. They have been lured by the prospect of guaranteed sales, with the government virtually mandating the purchase of their products. With the same reasons, companies like Pacific Gas & Electric and Exelon, dealing with energy, detach themselves from the opposition to the new scheme of “cap and trade,” with taxes on the emissions of carbon. With tighter control by the government, the companies that have invested in nuclear and “renewable” energy stand to rake in a large share of the business handed out by the government. Faced then with a choice between a freer market and living off the patronage of income allotted by the government, these companies have chosen the path of a more risk-free capitalism.

When businessmen these days take courses on “business ethics,” the courses usually center on conflicts of interest. They may not as often touch on such vexing questions as covering abortions in medical plans. But on this matter of corporatism, there is a void. Apparently it doesn’t come within the recognition of businessmen that, when they consider the moral terms on which they live, they may have a distinct interest, as businessmen, in preserving the deep moral principles of a constitutional order.

Hadley Arkes is the Ney Professor of Jurisprudence Emeritus at Amherst College and the Founder/Director of the James Wilson Institute on Natural Rights & the American Founding. He is the author of Constitutional Illusions & Anchoring Truths: The Touchstone of the Natural Law. Volume II of his audio lectures from The Modern Scholar, First Principles and Natural Law is available for download. His new book is Mere Natural Law: Originalism and the Anchoring Truths of the Constitution.