Historically, corporatism (Italian: corporativismo) refers to a political or economic system in which power is held by civic assemblies that represent economic, industrial, agrarian, social, cultural, and/or professional groups. These civic assemblies are known as corporations (not the same as the legally incorporated business entities known as corporations, though some are such). Corporations are unelected bodies with an internal hierarchy; their purpose is to exert control over the social and economic life of their respective areas. Thus, for example, a steel corporation would be a cartel composed of all the business leaders in the steel industry, coming together to discuss a common policy on prices and wages. When the political and economic power of a country rests in the hands of such groups, then a corporatist system is in place.
The word "corporatism" is derived from the Latin word for body, corpus. This meaning was not connected with the specific notion of a business corporation, but rather a general reference to anything collected as a body. Its usage reflects medieval European concepts of a whole society in which the various components - e.g., guilds, universities, monasteries, the various estates, etc. - each play a part in the life of the society, just as the various parts of the body serve specific roles in the life of a body. According to various theorists, corporatism was an attempt to create a modern version of feudalism by merging the "corporate" interests with those of the state.
It became popular during the rule of Getulio Vargas in Brazil during the 1920s and 1930s when issues of social welfare arose. He implemented a form that promoted what was then referred to as modern capitalism. Its objective was to be moderate, and not completely open to free markets.
Political scientists may also use the term corporatism to describe a practice whereby a state, through the process of licensing and regulating officially-incorporated social, religious, economic, or popular organizations, effectively co-opts their leadership or circumscribes their ability to challenge state authority by establishing the state as the source of their legitimacy, as well as sometimes running them, either directly or indirectly through corporations. This usage is particularly common in the area of East Asian studies, and is sometimes also referred to as state corporatism. Some analysts have applied the term neocorporatism to certain practices in Western European countries, such the Proporz system in Austria. At a popular level in recent years "corporatism" has been used to mean the promotion of the interests of private corporations in government over the interests of the public.
Corporatism is a form of class collaboration put forward as an alternative to class conflict, and was first proposed in Pope Leo XIII's 1891 encyclical Rerum Novarum, which influenced the Catholic trades unions that organised in the early twentieth century to counter the influence of trade unions founded on a socialist ideology. Theoretical underpinnings came from the medieval traditions of guilds and craft-based economics, and later, syndicalism. Corporatism was encouraged by Pope Pius XI in his 1931 encyclical Quadragesimo Anno.
One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin "dangers" of the egalitarianism of the French Revolution and the laissez-faire economics of Adam Smith. In Germany and elsewhere there was a distinct aversion among rulers to unrestricted capitalism, owing to the feudalist and aristocratic tradition of giving state privileges to the wealthy and powerful.
In Italy, corporatism became influential amongst Italian nationalists, Alfredo Rocco spoke of a corporative state and declared corporatist ideology in detail, Rocco would go on to become a member of the Italian Fascist regime. Under fascism in Italy, business owners, employees, trades-people, professionals, and other economic classes were organized into 22 guilds, or associations, known as "corporations" according to their industries, and these groups were given representation in a legislative body known as the Camera dei Fasci e delle Corporazioni. See Mussolini's essay discussing the corporatist state, Doctrine of Fascism.
Similar ideas were also ventilated in other European countries at the time. For instance, Austria under the Dollfuß dictatorship had a constitution modelled on that of Italy; but there were also conservative philosophers and/or economists advocating the corporate state, for example Othmar Spann. In Portugal, a similar ideal, but based on bottom-up individual moral renewal, inspired Salazar to work towards corporatism. He wrote the Portuguese Constitution of 1933, which is credited as the first corporatist constitution in the world. See also: Fascism as an international phenomenon.
While classical corporatism and its intellectual successor, neo-corporatism (and their critics) emphasize the role of corporate bodies in influencing government decision-making, corporatism used in the context of the study of authoritarian or autocratic states, particularly within East Asian studies, usually refers instead to a process by which the state uses officially-recognized organizations as a tool for restricting public participation in the political process and limiting the power of civil society.
at the national level the state recognizes one and only one organization (say, a national labour union, a business association, a farmers' association) as the sole representative of the sectoral interests of the individuals, enterprises or institutions that comprise that organization's assigned constituency. The state determines which organizations will be recognized as legitimate and forms an unequal partnership of sorts with such organizations. The associations sometimes even get channelled into the policy-making processes and often help implement state policy on the government's behalf.
By establishing itself as the arbitrator of legitimacy and assigning responsibility for a particular constituency with one sole organization, the state limits the number of players with which it must negotiate its policies and co-opts their leadership into policing their own members. This arrangement is not limited to economic organizations such as business groups or trade unions; examples can also include social or religious groups. Examples abound, but one such would be the People's Republic of China's Islamic Association of China, in which the state actively intervenes in the appointment of imams and controls the educational contents of their seminaries, which must be approved by the government to operate and which feature courses on "patriotic reeducation". Another example is the phenomenon known as "Japan, Inc.", in which major industrial conglomerates and their dependent workforces were consciously manipulated by the Japanese MITI to maximize post-war economic growth.
On October 9, 2007, an article signed by Viktor Cherkesov, head of the Russian Drug Enforcement Administration, was published in Kommersant, where he used the term "corporativist state" in a positive way to describe the evolution of Russia. He claimed that the administration officials detained on criminal charges earlier that month are the exception rather than the rule and that the only development scenario for Russia that is both realistic enough and relatively favorable is to continue evolution into a corporativist state ruled by security service officials.
"The process of this state evolving into a new corporativist (sic) model reached its completion in 2005. ... The strengthening of the corporativist state model and setting up favorable conditions for quasi-state monopolies by the state itself hurt the economy. ... Cabinet members or key Presidential Staff executives chairing corporation boards or serving on those boards are the order of the day in Russia. In what Western country—except in the corporativist state that lasted for 20 years in Italy—is such a phenomenon possible? Which, actually, proves that the term 'corporativist' properly applies to Russia today."
All political powers and most important economic assets in the country are controlled by former state security officials ("siloviks"), according to some researchers. The takeover of Russian state and economic assets has been allegedly accomplished by a clique of Putin's close associates and friends  who gradually became a leading group of Russian oligarchs and who "seized control over the financial, media and administrative resources of the Russian state" and restricted democratic freedoms and human rights
Illarionov described the present situation in Russia as a new socio-political order, "distinct from any seen in our country before". In this model, members of the Corporation of Intelligence Service Collaborators [Russian abbreviation KSSS] took over the entire body of state power, follow an omerta-like behavior code, and "are given instruments conferring power over others – membership “perks”, such as the right to carry and use weapons". According to Illarionov, this "Corporation has seized key government agencies – the Tax Service, Ministry of Defense, Ministry of Foreign Affairs, Parliament, and the government-controlled mass media – which are now used to advance the interests of KSSS members. Through these agencies, every significant resource of the country – security/intelligence, political, economic, informational and financial – is being monopolized in the hands of Corporation members"
Analyst Andrei Piontkovsky also considers the present situation as "the highest and culminating stage of bandit capitalism in Russia”. He believes that "Russia is not corrupt. Corruption is what happens in all countries when businessmen offer officials large bribes for favors. Today’s Russia is unique. The businessmen, the politicians, and the bureaucrats are the same people."
In Italian Fascism, this non-elected form of state officializing of every interest into the state was professed to better circumvent the marginalization of singular interests (as would allegedly happen by the unilateral end condition inherent in the democratic voting process). Corporatism would instead better recognize or 'incorporate' every divergent interest as it stands alone into the state organically, according to its supporters, thus being the inspiration behind their use of the term totalitarian, perceivable to them as not meaning a coercive system but described distinctly as without coercion in the 1932 Doctrine of Fascism as thus;
[The state] is not simply a mechanism which limits the sphere of the supposed liberties of the individual. . . . Neither has the Fascist conception of authority anything in common with that of a police ridden State. . . . Far from crushing the individual, the Fascist State multiplies his energies, just as in a regiment a soldier is not diminished but multiplied by the number of his fellow soldiers.
This prospect in Italian fascist corporatism claimed to be the direct heir of Georges Sorel's anarcho-syndicalism, wherein each interest was to form as its own entity with separate organizing parameters according to their own standards, only however within the corporative model of Italian fascism each was supposed to be incorporated through the auspices and organizing ability of a statist construct. This was by their reasoning the only possible way to achieve such a function, i.e. when resolved in the capability of an indissoluble state.
Some contemporary political scientists and sociologists use the term neo-corporatism to describe a process of bargaining between labor, capital, and government identified as occurring in some small, open economies (particularly in Europe) as a means of distinguishing their observations from popular pejorative usage and to highlight ties to classical theories.
In the recent literature of social science, corporatism (or neo-corporatism) lacks negative connotation. In the writings of Philippe Schmitter, Gerhard Lehmbruch, and their followers, "neo-corporatism" refers to social arrangements dominated by tri-partite bargaining between unions, the private sector (capital), and government. Such bargaining is oriented toward (a) dividing the productivity gains created in the economy "fairly" among the social partners and (b) gaining wage restraint in recessionary or inflationary periods.
Most political economists believe that such neo-corporatist arrangements are only possible in societies in which labor is highly organized and various labor unions are hierarchically organized in a single labor federation. Such "encompassing" unions bargain on behalf of all workers, and they have a strong incentive to balance the employment cost of high wages against the real income consequences of small wage gains. Many of the small, open European economies, such as Finland, Sweden, Austria, Norway, Ireland, Belgium and the Netherlands fit this classification. In the work of some scholars, such as Peter J. Katzenstein, neo-corporatist arrangements enable small open economies to effectively manage their relationship with the global economy. The adjustment to trade shocks occurs through a bargaining process in which the costs of adjustment are distributed evenly ("fairly") among the social partners.
Examples of modern neocorporatism include the ILO Conference, the Economic and Social Committee of the European Union, the collective agreement arrangements of the Scandinavian countries, the Dutch Poldermodel system of consensus, and the Ireland's system of Social Partnership. In Australia, the Labor Party governments of 1983-96 fostered a set of policies known as The Accord, under which the Australian Council of Trade Unions agreed to hold back demands for pay increases, the compensation being increased expenditure on the "social wage", Prime Minister Paul Keating's name for broad-based welfare programs. In Singapore, the National Wages Council and other state-created entities form a tripartite arrangement between the major trade unions (NTUC), employers, and the Government that co-ordinates the national economy. In Italy, the Carlo Azeglio Ciampi administration inaugurated in July 23' 1993 a concertation (Italian: concertazione) policy of peaceful agreement on salary rates between government, the three main trade unions and the Confindustria employers' federation. Before that, salary augmentations were always beset by strikes. In 2001 the Silvio Berlusconi administration put an end to concertation.
Most theorists agree that traditional neo-corporatism is undergoing a crisis. In many classically corporatist countries, traditional bargaining is on the retreat. This crisis is often attributed to globalization, with increasing labour mobility and competition from developing countries (see outsourcing). However, this claim is not undisputed with nations like Singapore still strongly following neo-corporatist models.
Contemporary popular (as opposed to social science) usage of the term is more pejorative, emphasizing the role of business corporations in government decision-making at the expense of the public. The power of business to affect government legislation through lobbying and other avenues of influence in order to promote their interests is usually seen as detrimental to those of the public. In this respect, corporatism may be characterized as an extreme form of regulatory capture, and is also termed corporatocracy, a form of plutocracy. If there is substantial military-corporate collaboration it is often called militarism or the military-industrial complex.
Corporatism or neo-corporatism is often used popularly as a pejorative term in reference to perceived tendencies in politics for legislators and administrations to be influenced or dominated by the interests of business enterprises, employers' organizations, and industry trade groups. The influence of other types of corporations, such as labor unions, is perceived to be relatively minor. In this view, government decisions are seen as being influenced strongly by which sorts of policies will lead to greater profits for favored companies.
Corporatism is also used to describe a condition of corporate-dominated globalization. Points enumerated by users of the term in this sense include the prevalence of very large, multinational corporations that freely move operations around the world in response to corporate, rather than public, needs; the push by the corporate world to introduce legislation and treaties which would restrict the abilities of individual nations to restrict corporate activity; and similar measures to allow corporations to sue nations over "restrictive" policies, such as a nation's environmental regulations that would restrict corporate activities.
In the United States, corporations representing many different sectors are involved in attempts to influence legislation through lobbying including many non-business groups, unions, membership organizations, and non-profits. While these groups have no official membership in any legislative body, they can often wield considerable power over law-makers. In recent times, the profusion of lobby groups and the increase in campaign contributions has led to widespread controversy and the McCain-Feingold Act.
Many critics of free market theories, such as George Orwell[verification needed], have argued that corporatism (in the sense of an economic system dominated by massive corporations) is the natural result of free market capitalism.
Critics of capitalism often argue that any form of capitalism would eventually devolve into corporatism, due to the concentration of wealth in fewer and fewer hands. A permutation of this term is corporate globalism. John Ralston Saul argues that most Western societies are best described as corporatist states, run by a small elite of professional and interest groups, that exclude political participation from the citizenry.
Other critics say that they are pro-capitalist, but anti-corporatist. They support capitalism but only when corporate power is separated from state power. These critics can be from both the right and the left.
In the United States Republican President Ronald Reagan echoed Republican President Herbert Hoover and others who claimed that Franklin D. Roosevelt’s New Deal programs represented a move in the direction of a corporatist state. These claims are highly disputed. In particular these critics focussed on the National Recovery Administration. In 1935 Herbert Hoover described some of the New Deal measures as "Fascist regimentation." In his 1951 memoirs he used the phrases "early Roosevelt fascist measures", and "this stuff was pure fascism", and "a remaking of Mussolini's corporate state". For sources and more info see The New Deal and corporatism.
Some critics equate too much corporate power and influence with fascism. Often they cite a quote claimed to be from Mussolini: "Fascism should more properly be called corporatism because it is the merger of state and corporate power." Several variations of the alleged quote exist. However no text written by Mussolini has yet been found with any variation of the alleged quote.. Despite this, the alleged quote has entered into modern discourse, and it appears on thousands of web pages, and in books, and even an alternative media advertisement in the Washington Post.. However, the alleged quote contradicts almost everything else written by Mussolini on the subject of the relationship between corporations and the Fascist State..
In one 1935 English translation of what Mussolini wrote, the term "corporative state" is used, but this has a different meaning from modern uses of the terms used to discuss business corporations. In that same translation, the phrase "national Corporate State of Fascism," refers to syndicalist corporatism. The dubious quote is sometimes claimed to more accurately summarize what Mussolini did and not what he said. However many scholars of fascism reject this claim.
There is a very old argument about who controlled whom in Fascist Italy and Nazi Germany at various points in the timeline of power. It is agreed that the army, the wealthy, and the big corporations ended up with much more say in decision making than other elements of the corporative state. There was a power struggle between the fascist parties/leaders and the army, wealthy, and big corporations. It waxed and waned as to who had more power at any given time. Scholars have used the term "Mussolini's corporate state" in many different ways.
Franklin D. Roosevelt in an April 29, 1938 message to Congress warned that the growth of private power could lead to fascism:
The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism—ownership of government by an individual, by a group, or by any other controlling private power.
From the same message:
The Growing Concentration of Economic Power. Statistics of the Bureau of Internal Revenue reveal the following amazing figures for 1935: "Ownership of corporate assets: Of all corporations reporting from every part of the Nation, one-tenth of 1 percent of them owned 52 percent of the assets of all of them."