Tuesday, February 24, 2015

Back to corporatism?

A potted history of American political economy goes like this: After WW2 and the Depression, the laissez-faire/cronyist developing-country economy we had earlier was replaced with a corporatist one. The corporate welfare state, supported by a thicket of government regulation and high taxes, and given a sense of stability and security by the deglobalization that occurred in the mid-20th century, created a middle-class nation. Most workers had well-paying, secure jobs, although some outsiders (women, blacks, the poor) were excluded from the cushy system. Worker bargaining power was strong and unions flourished. The power of the corporation was yoked to the interests of the workers. Then, beginning in the early 70s, neoliberal policies replaced corporatist ones, Deregulation, the rise of shareholder capitalism, and the resumption of globaliztion crushed the old corporatist system, leading to a bifurcation of the middle class and to the end of job security.

If you believe something resembling this potted history, that still leaves a big question: Was the end of corporatism driven mainly by globalization or mainly by domestic politics (assuming we reject conservatives' preferred explanation, the "rise of the robots")? If foreign competition, first from a resurgent Europe and Japan and later from China and a whole host of poor countries, made America's cushy managerialist corporate welfare state simply unviable, then neoliberalism can be seen as a natural, necessary response, however suboptimal its implementation was. But if you think that domestic political changes - the switch of the South to the Republican party, for instance, or the introduction of big money into politics - drove the neoliberal revolution, then you'll probably conclude that neoliberalism can be politically reversed without doing much damage to the economy.

I see this as being big debate among American liberals. The ambivalence can be felt in this recent Brad DeLong post:
On the two-year and ten-year agendas...are dealing with and reversing the enormous upward redistribution that has taken place with the rise in the social, political, and economic power of the Overclass. That is:
  • Restoring full employment as a priority…
  • Rebalancing the corporation so that shareholders and the financiers top managers who can initiate corporate control transactions are no longer the only stakeholders that matter…
  • Restore long-run productive investment as a priority in public budgeting…
Underlying this position is a belief, perhaps, that so much of what is produced is so close to a joint Leontief product that something like the marginal product theory of distribution is profoundly unhelpful, and that questions of distribution are overwhelmingly resolved by economic bargaining power conditioned by social mores and politically-chosen institutions. Perhaps there used to be three sources of bargaining power, and thus three sources of durable advantage:
  • Possession of the intellectual property and expertise needed to construct the high-throughput mass-production assembly lines of what used to be called “Fordist” capitalism…
  • Control over the brands and other distribution channels necessary in order to sell the products of high-throughput mass-production factories to the middle classes of the North Atlantic who could afford to buy them at a good price…
  • A blue-collar working class that had sufficient class consciousness to bargain for itself, and that was insulated by the requirement that the factories be located near to the engineers and to the corporate headquarters which needed to be placed so as to keep their eyes on the market…
And then, perhaps, over the past generation the third has dropped away, with the coming of globalization and the successful war against private sector unions. The rest are now themselves in flux. And perhaps they have been joined as a source of rent-extraction by those with the ability to tap into the savings produced in this age of the Global Savings Glut… 
But I think that the sources of this enormous upward redistribution have not yet been properly sorted-out.
DeLong is conflicted. He is a rationalist, and so he concludes that he does not have enough data to decide whether globalization or domestic politics was mainly to blame. Not having enough data, he cannot bring himself to make a policy conclusion about how to achieve the second of his three objectives ("rebalancing the corporation", i.e. restoring corporate welfare). DeLong is like me in this way. I try to assess the data objectively first, then think about solutions only after making the assessment of the facts.

But Marshall Steinbaum, the young colleague whose post DeLong is responding to, is no such rationalist. There is no question which culprit he will blame. And there are many others like him. So I think that in the internal liberal argument over the reason for corporatism's collapse, the people who think the shift was political are almost certain to win.

There are three reasons for my prediction.

First, people would rather be powerful than powerless. If globablization is responsible for the end of the corporate welfare state, then the corporate welfare state is not coming back in our lifetimes. And the veto points in the American political system, combined with an increasingly rejectionist Republican party, mean that a government welfare state along European lines will be very difficult to implement here in America. So believing that we could choose to reinstall corporatism without big adverse effects is an empowering belief.

Second, people are afraid to be seen as anti-trade, or protectionist. In actuality, globablization couldn't be reversed by U.S. protectionism. Corporatism might be restored here at home, but the loss of our export markets would make it a pyrrhic victory. So believing that globalization killed corporatism is NOT actually an argument for protectionism. But people will see it as such. That means if American liberals start blaming globalization, they'll get A) a lot of people actually trying to implement protectionist measures, and B) a ton of flack from defenders of free trade, a concept that is still enshrined with pride of place throughout the econ and public policy worlds.

Third, people like to blame their political enemies for bad things, rather than nature or chance. Blaming the Koch brothers and the South for killing corporate welfare is more pleasing than blaming globalization, because doing the former gives us a reason to beat up on the Koch brothers and the South, while the latter does not.

So for these reasons, I predict that we will see more liberals decide that the corporate welfare state can and should be restored by political fiat - whether or not that is actually possible or desirable.


  1. Anonymous3:42 PM

    What of Tyler Cowen's Great Stagnation thesis? Idea is that the 50's and 60's saw the culmination of a century of amazing technological progress, which then slowed. And this trend swamps all but the largest policy changes (tax & competition policy was not exactly stellar in the US during this time). Granted, tech innovation is not exogenous. But I agree that finger-pointing and scapegoating is much easier/more popular than identifying impersonal underlying trends.

    1. Well, GDP has mostly continued along the same trend, but the lower middle class has had losses while the upper middle class and rich have had gains. GDP did not stagnate.

    2. http://research.stlouisfed.org/fred2/graph/?g=RDG

    3. I wonder about the effect of regulation on the Great Stagnation in the U.S. There was an explosion of regulation beginning in the early 1970s. Other countries had much, much greater stagnations, BTW.

    4. Noah, I get similar results, especially when I stretch the graph back to 1929.
      However, first, children and lots of old people can't work, so a lot of the "growth" in the 1970s and after was just the after-effects of the Baby Boom. Secondly, nobody on the Left I know of uses the GDP deflator to deflate wages/earnings.
      I'll now wait until FRED's back up.

    5. Point is, the amount of material wealth in the U.S. kept increasing at a steady clip after 1970, Great Stagnation or no Great Stagnation. And the lower middle class did not get very much at all of that material wealth. And the upper middle class did get a fair bit, and the rich got a lot.

      That is the thing that upsets liberals. And it's just a fact.

    6. "the upper middle class did get a fair bit" ???

      Dredged this very old income share chart up from my files: Dean Baker (in 18th reply on his blog post -- the only reason I know these vital "Great Wage Depression" stats) reproduced what he called "a slightly altered table" from Gordon's paper*, showing income shares in 1972 and 2001" -- my percentage changes on the right.

      % _________1972_____2001
      0-20 ______ 2.6%, ___ 2.0%____ – 0.6
      20-50 ____ 16.0%, ___ 11.7%____– 4.3
      50-80 ____ 33.7%, ___ 27.2%____– 6.5
      80-90 ____ 17.0%, ___ 16.1%____– 0.9
      90-95____ 10.8%, ___ 11.3%____+ 0.5%
      95-99.0___12.2%, ___ 14.8%____+ 2.6%
      99.0-99.9__ 5.7%, ____ 9.6%____+ 3.9%
      99.9 -100__ 1.9%, ____ 7.3%____+ 5.4%

      * http://faculty-web.at.northwestern.edu/economics/gordon/BPEA_Meetingdraft_Complete_051118.pdf
      (see p. 84 of Gordon for similar breakdown of wage income)

      Looks more like the very upper middle got a bit -- things much worse since.

    7. Opps,

    8. Those are income shares, not income levels.

    9. What about these three things:
      1) trade imbalances: allow for exporting of jobs as goods can be made overseas and imported for "funny money"
      2) repeal of Glass-Steagall: allows banks to originate money creating loans to purchase speciously valued derivative securities
      3) repeal of Bretton Woods: allows banks to set the values of currencies without regard to real economic values

  2. It's all of the above, but more specifically it was domestic politics using globalization and technology to redistribute upwards. Partly it was by killing the labor movement, but partly by avoiding a high-pressure full employment economy by deliberately subpar monetary, fiscal and currency (demand management) policy.

    We haven't seen inflationary pressures since the 1970s as the trade deficit hurt the export sector and monetary plus fiscal policy didn't pick up the slack. When we did get labor sharing in productivity gains in the late 1990s it wasn't long before the economy hit popping bubbles because of deregulation and fraud. First the tech stock bubble then the housing bubble. It wasn't just that neoliberalism was put in effect. Also the financial sector metastasized.

    And when the bubbles popped, you get subpar counter-cyclical policy. So wages stagnate and wealth redistributes upwards.

    The politics had Clinton moving to the right and Obama doing it less so. Obamacare is an addition to the welfare state. Clinton's reforming welfare was dismantling it. It didn't have to be that way, but the Democrats sold their soul for finance's money. The populists could take back the Democrats. It's possible. It's also possible that the Republicans self-destruct after Hillary wins back to back elections. They don't have the votes but they have enough to buy the House and Senate.

    I don't see much of a debate among liberals. Globalization and competition/trade with other nations could have been done in a more equitable manner. Germany and Japan did it that way.

  3. Redistribution of income from the wealthy to the poor does not have to be effected through large corporations. Merely providing the poor and working poor with decent health care and educational opportunities would be a huge shift to the left in American politics.

    My potted history would go like this: In 1946 the plutocrats running and looting America realized that they suddenly had about ten million American veterans who had been trained to kill and risked their lives for their country. Not surprisingly those veterans felt that the country owed them. At the same time the wealthy were facing an ideological challenge from the Soviet Union. The plutocrats decided that they had to share the wealth with the poor and the middle class or run the risk of being dragged from their offices by angry mobs of unemployed veterans. At the same time the wealthy also decided to tolerate high tax rates to pay for a robust defense against the Communists.

    By 1980 the veterans were too old and comfortable to form a dangerous mob, and Communism had receded as a threat, so the right decided it was again safe to turn the screws on the working class and middle class.

    1. Anonymous11:50 AM

      I basically agree. Before communism became popular the middle class was tiny. I think that the large middle class of the mid 20th century was created as a vanguard against communism. Once communism ceased to be much a threat the middle class ceased to be useful and it could start shrinking back towards its natural state.

      What will be interesting to see is when and how this transition comes to be viewed as positive.

    2. Doc at the Radar Station8:30 PM

      Absalon has got it nailed...

  4. Noah, your site provides a long list of Econ blogs. Is there one that's down the middle? Naming what you believe is the "preferred explanation of conservatives" doesn't make it so. And the comments from Peter and Absalom are what I expect to find under a Krugman blog post. I don't understand how liberals can sit up so straight on their high horses and laugh at the dumb things coming out of the right, and then in the next sentence come out with ridiculous notions from the left. It's exhausting.

    1. Down the middle? Hmm. Try Tim Taylor: http://conversableeconomist.blogspot.com/

  5. As for the so-called debate among the liberals, I think you are making a prediction ex post. Maybe macroeconomist liberals are debating whether the change was necessitated by globalization or political in nature, but policy making liberals made up their minds long ago.

  6. It's easy to figure out what the source of the neo liberal revolution was: it was political, but it was also a considered response to the world situation. In other words , globalization itself was a political process. How do we know? Since several other western countries travelled the opposite way, building welfare states in the 70's.
    The small problem with their "success" is that it made them poorer. Their catchup growth reversed and they became progressively relatively poorer. France is the object lesson here. As its Sweden, both in the expansion of the welfare state and its reversal in the 90's.

    1. Anonymous11:38 PM

      INSEE data on companies show that "taux de marge" is almost constant since 1949. Welfare actually softened 2008 crisis effects by supporting aggregate demand.


      Data since 1949 are available by following the link " Télécharger au format Excel (Série longue depuis 1949, 32 Ko)" XLS format.

      Ludovic Coval

    2. Ah, yes, welfare did soften the blow in 2008, but also helped you fall way behind over the last 30 years. I don't know if you want to be another Argentina, but you are on your way.

  7. The changes in the corporatist model were arguably domestic in source, since levels of unionization in most other rich countries are much higher despite being subject to similar globalization (or even more so). But there is a role for globalization there, in that even if the unions had remained strong odds are they'd be forced to give ground in the face of global trade even if the membership levels didn't shrink.

    In the long run . . . keep in mind you can structure trade treaties so that they establish minimal, enforceable standards of society allowing the violators to be sued in the courts of the participating countries. We just don't do it because most of our trade treaties are designed primarily as handouts to specific economic sectors.

  8. Anonymous12:57 AM

    "If foreign competition, first from a resurgent Europe and Japan and later from China and a whole host of poor countries, made America's cushy managerialist corporate welfare state simply unviable, then neoliberalism can be seen as a natural, necessary response"
    1) Sure, the other 'natural, necessary response' is to return those parts of the world back to their pre-industrial state like the British did to...Asia....and in 1960s the Americans had the overwhelming power to do so. So why didnt they?
    2) America runs a structural deficit, turning protectionist might lose the 'export' markets -- oh no, Apple wont be able to use slaves to build their iphones so the profit margin isnt 30% but just 5%, well thats awful! -- then whats the big deal? A lot of stuff might cost more in America but more Americans are employed and live in stable, lower middle class jobs.

    People with tenure are always so happy to expose others to the cruel free market, never themselves though huh.

  9. I love this post for so many reasons!

    My prediction is that a lot of smart people simply won't respond to this post because it contains some serious attacks on their partisan priors. Left liberals will never associate themselves with a term like "corporatism". Regulations designed to protect businesses from competition are only supposed to help the rich! It's really sad.

    Of course it's not necessary to choose between globalization and politics. Obviously it was a combination of the two. But I think you're neglecting demographics as well. Along with globalization, slower population growth has made corporatism less viable. Demographics are another factor that will tend to anger promoters of the internal politics story.

  10. The bigger issue is what the source of the big redistribution of income is. Obviously, it's easier to chase some phantoms of power and corruption, especially when you want the police to intevene no matter what. The most likely explanation is the simplest: the labor supply shock. Half of humanity joined the western system during the last 30 years: the loss of bargaining power of labor would be fully expected in such circumstances. In truth, even this is a local (western) phenomenon. Globally, inequality is decreasing and has been for the last thirty years.

  11. So your conclusion is that the majority of left-liberals who take a position will impotently blame "neoliberalism" and dream of the day they recapture both houses and can implement corporatism by fiat? Apparently you're not very hopeful about the future of left-liberalism.

    There are two I think revisionist histories in your account. There was never any cozy relationship between corporatism and unions. They were in pitched battled all along. Anecdotal Ford quotes aside, American corporations never really gave much credence to the idea that paying more would help them sell more. From the standpoint of an individual company, it's mathematically incorrect. Corporatism was a way of instilling loyalty, gaining political power, and a defense against unionism.

    And there was no such thing as "neoliberalism" in the 1970s. You might be able to find a few prints of the word in an old news archive but the term as we know it didn't exist yet. There were classical liberal intellectuals who held no power. The battle was between conservatives and left-liberals, with conservative, mostly southern Democrats in the swing. The left-liberals were generally on the losing side, except in the courts. They threw themselves behind Carter because they thought he would be a powerful ally. It didn't work out so well.

    I can't think of any big political attack on corporatism in the 1970s. I was too young to understand it but in my Boeing neighborhood corporatism died in 1973. Around the country great hulking American boats were mocked by cheap little Datsuns, Raging inflation was blamed on the unions. The decay of inner cities and the humiliations in Vietnam, Iran and Afghanistan furthered a sense of disintegration and decline.

    Thatcher and Reagan and Kohl weren't any kind of liberals. They were straight-up conservatives. Their market reforms were inspired by classical liberals like Friedman, but none of it was anti-corporatist. Thatcher and Reagan were anti-union in the same way earlier conservatives had been. But the winds of change had shifted decisively to their side.

    It's interesting to me that you being on the left-liberal side attribute so much influence to classical liberal thought in America. It has had in Europe, no doubt, but in America classical liberalism has been marginal all my lifetime. Sure Reagan helped crushing the unions, negating the need for corporatism as a defense against them. But it was corporations that killed corporatism, to the extent it really existed or died. It was never quite so big as in the fairy tale of '50s nostalgia, and there's still no small amount of it today.

    1. Curious to know Noah's response to this, as it sounds like it makes a lot of sense.

    2. I don't know that "Thatcher and Reagan and Kohl" can all be rolled in one like this. Germany was never a Keynesian economy even during the post-war golden decades of Keynesianism, and classical liberalism has never been very prominent there either. The Free Democratic Party, which was the main representative of classical liberalism in Germany, was always electorally a very minor force.

      Kohl, like most other German centre-right politicians from Konrad Adenauer in the 1950s to Angela Merkel today, is an Ordoliberal, and Ordoliberalism, as even the name hints, is definitely a type of liberalism. If there is one thinker Kohl was influenced by, it's probably the quintessential Ordoliberal Wilhelm Röpke. He was at one time briefly president of the notorious Mont Pelerin Society, but later resigned from it quite dramatically, precisely because of the other members' excessive classical liberalism.

    3. I'll give you that point, I wrote too hastily there. Kohl is at the least a very different kind of conservative, and unlike the other two more than just influenced by liberals, arguably as much a liberal as a conservative. There's a lot of overlap in the European center-right. And I do also tend to lazily lump together the various kinds of European liberals, for whom "classical" is a much more particular distinction than in the US.

    4. PS I'm really more of what a European would call a social liberal than a classical liberal myself, but you're an oddball enough in the US just being any kind of liberal other than left.

  12. Richard7:21 AM

    The separation of the political and impersonal global forces is not as sharp as this post implies.

    Globalization has been implemented in a highly political way, benefiting the best off and hurting most workers. For example:

    Factory workers are put in competition with foreign workers, while doctors, lawyers and other highly paid workers are insulated.

    Trade agreements are designed to increase protection for intellectual property, which is owned by and benefits the best off. For example, higher drug prices cost everyone (American and non-American) hundreds of billions of dollars a year, with the benefits flowing to the owners and managers of drug companies.

    The US high dollar policy results in a trade deficit that shifts hundreds of billions of dollars of demand overseas. Global corporations benefit, US workers have less power.

    1. "Globalization has been implemented in a highly political way"

      Seems like you are saying it was all by some evil design but it seems to be much a much more natural process to be. Factory workers were put in competition with foreign workers because it's very easy to load a million widgets on a container ship. Intellectual value that doctors and lawyers bring is much harder. That's why they've been insulated.

    2. Richard8:35 AM

      For doctors and lawyers, just allow non-US doctors and lawyers into the country. Either rely on foreign licensing if from an appropriate country or let them take a US exam. Not hard at all.

    3. Richard8:46 AM

      Also, government licenses doctors and lawyers and will arrest anyone who tries to compete with them, while no such protection is afforded factory workers.

    4. Anonymous11:06 AM

      Doctors and lawyers always gets lumped together in these discussions, but they are two entirely different cases. The medical associations are generally run by a wide array of doctors, and they work to restrict supply in the ways described above. The legal associations on the other hand are run by (1) large law firms and (2) law schools. They seek to maximize supply (within the constraint of passing through 3 years of expensive education) since it creates a cheap labor force. Legal work is intrinsically more expensive than medical work due to the amount of time involved in most cases, so pressures to decrease legal costs have to deal with this constraint.

    5. But haven't most of the licensing requirements imposed on doctors come from the left in the name of patient protection? It seems most classical liberals and those on the right oppose these licenses. Regardless, I'm not sure allowing foreign doctors in will bring the same level of competition as outsourcing labor. It's still much easier to do the latter and it allows the foreign labor to remain in their foreign (read cheap) markets.

  13. Anonymous7:22 AM

    Trade agreements were done so that US (and other Western) corporations have easy access to markets in other countries, including the cheap labor, and protection equal or greater than in US. At the same time, taxes were cut, state monopolies were deregulated and state investment in everything was lowered. All of that contributed to corporation profits, as opposed to security for workers.
    When system is such that your richest companies can extract most revenue from US, but transfer all that so that taxes are paid in tax heavens, it's not just globalization, it's cronyism or poor planning.
    US, Europe + Japan should not only support, but lead research in some key areas. Imagine drug research: if US+Europe+Japan decide to do so, they can fund equal amount to today's commercial + governmental drug research, for couple of percent of what they are spending on health costs. Benefit: 1. they would direct areas of research (no company wants to invest heavily into new antibiotics, since they would be used only as last line of defense, and would be unprofitable); 2. companies wouldn't be able to charge extreme prices, so medicaid/medicare/health security savings would more than make up for spent research.
    Before Regan, US spent heavily on fusion research. Now most of research comes through private companies. The effects: it is unlikely that fusion will be widely available before the end of the century, and energy costs will be as high as possible, with profits going to the company that gets the first working patent.

    Globalization and other changes were sold to the people through great marketing: corporations were supposed to only export the lowest-paying jobs, leaving US workers working in better conditions, for better pay; profits from foreign markets were supposed to go to US, employing more people and paying more taxes; reduction in taxes on wealthy was supposed to increase investment and employment in the US, deregulation of other services was supposed to decrease prices, increase options and better management of all resources, like it did for communication industry.

    In reality, many jobs were outsourced, including those requiring university degree, and companies sent profits where taxes are low or non-existent. Trickle-down effect does not exist (it was based on the assumption that rich people do not invest because part of the profits goes to state, but taxes would have to be a lot over 50% for that to happen, possibly closer to 90%; Regan and his advisers essentially said that investor would forgo the opportunity to make $1M if it meant giving the government another $1M, while most psychologists would say that investors wouldn't forgo the opportunity to make $1M even if it meant giving the government $5M from profits of that project).
    Deregulation worked great for communications, although even there are problems now, when customers cannot freely and without added cost chose their internet provider. But for other commodities, like electrical power, water, even waste disposal, large inelasticity and large real barriers for new entrants (as opposed to administrative ones in communications sector) meant that savings went to corporations, and "flexibility" went mostly against the interest of the customer.
    All in all, while globalization was one of the key drivers of the change, laws and regulations were changed disproportionally in a way that helped the richest, and against the working class.

  14. I see words and sentences. You may as well have thrown in praxeology a few times because this made no sense.

    What scares me is that from the comments, this debate actually made sense to people. When I see posts like this by a younger generation of economists I fear economics is dead, gone the way of sociology as a useful framework for policy.

    Just ivory tower elitists with no practical experience doing what they always do, armchair quarterbacking from a comfortable bubble. These kinds of posts blaming "domestic politics" always come dangerously close to sounding something like the ivory tower mandarin class lamenting that people vote against the policies that the ivory tower mandarin class thinks are best for us.

  15. One point that nobody has yet made is that in the US, the big unions wholeheartedly supported the Vietnam War. This pretty much cut them off from the constituency from which young union activists had been recruited during the golden age of corporatism to replace retired and dead ones. During the Johnson and Nixon years, the unions thus ceased to be part of a "package" that could be bought unproblematically by those for whom opposition to the war had emerged as a kind of minimum requirement for social and moral respectability.

  16. "Corporate welfare state"? Wouldn't a focus on labor's ability to extract the maximum the buyer of the product is willing to pay -- extractable only through (the throughput of) an effective collective bargaining setup; which to me means only European style centralized bargaining -- sound a lot closer to a (truly) classic theoretical goal?

  17. Anonymous11:16 AM

    One big problem with your argument:

    1. Globalization is really about China.
    2. Nothing about China can be described as "free trade".

    1. This is true, but is not a problem for my argument!

  18. Even though this sounds like a sophisticated description of the issues at hand, it is actually far too simplistic to make sense. It demands false choices of blame and false choices of remedies. It relies upon ultimatums of outcomes that don't exist. In short, it is nonsense.

    The prosperity of the period after WWII was not sustainable regardless of globalization. It was as the Republicans like to point out, seizing up, but not by government regulations, but rather by citizen expectations. It is true the the unions combined with weak corporate leadership (and government leadership) was leading us into a stalemate of declining prosperity.

    The leaders believed that globalization (which was not ever a natural phenomenon) could help break that stalemate, and so they went full force into pushing it upon the citizenry. Clearly the citizens were never involved in that decision. It was forced upon them.

    We never had the political debates required to fix our problems because the corporate leaders not only liked the outcome of globalization, they profited from it enormously. And now so many of our economists, the neoliberal and classical conservative economists alike, have no understanding of the causes, the solutions or the effects.

    Sorry, but this isn't the debate we need. This is not an either or.

  19. Trade agreements are somewhat of a red herring. The textile and furniture industries totally disappeared from the US in the absence of any trade agreement. Arguably containerized shipping did more to affect global commerce than any trade agreement has. Instructive book to read is Beth Macy's 'Factory Man' about the demise of the furniture industry in VA and NC.

  20. I thing that is easily forgotten but could have more importance than it seems is that it was the left-wing (not the right-wing) the first to break to corporatist consensus; before the deregulation, the low taxes, etc., etc, from the right, it was the left (or some left), in the 1960s, how rejected the model "a safe job and a good wage working for a big corporation", prefering instead to be independent artisans living in a remote area, or something like that.

    Perhaps it was this the cause of the fall of corporatism - at the end, both the hippie left and the business right are not much interested in defending it (both considering it a "golden cage" who sacrificed freedon for safety).

  21. Oh dear. People discussng something that none of them seem to have the remotest idea what it is, including Noah, with maybe only Brett sort of on top of it here. But, the term "corporatism" has been thrown around so much by so many, well, heck, guess it can mean whatever the person using wants it to mean, as in Alice in Wonderland.

    So, historically there were two types of corporatism, both coming out of a 19th century movement that was strongly supported by persons in the Roman Catholic Church, a government supported social contract to reduce the class struggle between capital and labor.

    So, in practice the first two officially follow it were the Italian fascists, who did in fact combine a left-right politicial influence, with as it were "Bonapartism" being the original model to subdue class conflicts into a nationalist harmony. In this model, picked up by the German Nazis, this harmony was achieved by command force from the state.

    An alternative appeared initially in Sweden, but gained adherents in other, mostly European, nations after WW II, in which there were nationwide bargaining relations between management and labor, the foundation of this in Sweden being the 1938 Saltsjobaden Agreement between the top industrial management and unions, made wtihout any government input, although later government officials would be involved in helping to facilitate these negotiations. The old form of this broke down in 1986, but it still survives in remnants there.

    A more conservative form of it, organizationally maintaining the structures of from fascism, survived and still exists in the actually existing Austria., with "chambers" for labor and management and sectors. This had more government direction, but lost its command element after WW II. Certainly from 1945 to 1990, the corporatist economies (including the Netherlands and some Nordic economies besides Sweden as well as Austria), had the world's lowest misery index, sum of inflation and unemployment rates. Not too shabby.

    The final relevance here of this is to the post and the debates, namely, ding the role of globaization or free trade on actually existing corporatism as opposed to the fantasy of calling what we had in the US "corporatism," one of the least corporatist economies in the world. All of these successful post-WW II corporatist economies were small and very open economies. The fascists corporatists were very protectionist, but these later ones were all very free trade. Indeed, this was part of what drove these natinowide bargaining arrangements (yes, liberal corporatism does need a high rate of unionization), was precisely the concern of maintaining the competitiveness of their export sectors, which dominated their economies. In effect the underlying deal was that management would restrain price increases while labor agreed to hold back on wage increases in the export sector, and then the deal would be spread to the rest of the economy.

    What broke down the old deal in Sweden was an increase in the non-traded economy, particularly government workers, who demanded wage increases in excess of those coming out of these agreements. But this clearly had nothing to do with globalizaton or free trade. It was strong consciousness of global linkages that enforced this old corporatism.

    1. How could we possibly have a coherent conversation about this when everybody thinks everybody else doesn't know what they're talking about?

      Your historical perspective is interesting.

      Now, if we're going to solve new problems we should talk about the new problems.

      The globalization of today is quite a bit different than the globalization of old.

      That would be a place to start a meaningful conversation.

    2. Dave,
      Since I have come on as Mr. Super Pompous (not for the first time here, and apologies for failiing to proofread), let me provide some references for what I put above.

      Here are some excellent sources on corporatism as an economics system (note: I am coauthor of one of the two leading textbooks on comparative eonomic systems, now being revised for a third edition from MIT Press).

      Frederic L. Pryor, "Corporatism as an Econmic System: A Review Essay," Journal of Comparative Economics, 1988, 12, 317-344.

      J. Pekkarinen, M. Pohjola, and B. Rowthorn, eds., Social Corporatism: A Superior Economic System. Oxford: Clarendon Press, 1992.

      This literature distinguises "authoritarian" from "liberal" corporatism, the former being the fascist variety, which also operated in Vichy France. The latter is further subdivided into "consensus" and "conflict" varieities, with the former being represented by Austria, and the latter by pretty much everybody else, mostly Nordic countries, but also Netherlands and some in Latin America occasionally.

      It was in the 1890s that the Catholic Churhc opined on this, and it was the Church that coined the term, "corporatism," which should make some who are throwing the term around loosely for this and that sit up. The origin of the idea seems to have come originally from French Catholic thinkers of a somewhat liberal orientation, desiring to accommodate the rising labor movement while keeping it in check from overt socialist and Marxist tendencies, to make it respectable within nationalist contexts. The generally accepted father of the idea was Frederic Ozanam, a participant in the 1848 French revolutionary uprisings, but a solid Church follower.

      The above literature and some other, universally lists the US as being just about the least corporatist nation/economy around, for various reasons.

      Regarding this weird term, "corporateist welfare state" that has been used recently, this looks like essentially meaningless gibberish to me. From the left it looks like welfare for corporations, which certainly exists in the US, see Dean Baker's book on the Nanny State all about goodies for corporations. It is not obvious to me that this sort of thing has declined recently, so if this is what is meant, "the corporatist welfare state" has not obviously declined.

      From the right, many would claim that it has not declined because they would focus on the "welfare state" part. While the old AFDC got somewhat limited when it got turned into TANF under Clinton, and a few small programs like public housing have been cut back, the larger parts of the welfare state have been expanding, certainly in terms of share of the federal budget. Even not counting Socials Security or Medicare, look at Medicaid and food stamps. So, no death of the "corporate welfare state" from that view.

      The only way one can argue that this poorly defined entity is declining is to tie it to the strength and membership of US unions. Yes, they are declining in membership and power, but this has been happening arguably since passage of Taft-Hartly in 1947, or maybe since the mid-1950s. Yeah, Reagan breaking the PATCO strke was a big hit, but just part of a trend, now picking up since Scott Walker did his number on public sector unions in Wisconsin, which might put him in the White House, or so he hopes.

      Now, it is certainly true that imports have badly damaged core private sector unionis, with much of this happening in the 1980s, although even Reagan attempted to slow this with things like his Voluntary Export Quotas policy with Japan. Was that "corporatism"? Maybe, in that it helped both capital and labor in the auto industry. But, remember that most recent coeporatist economiies have been very open.

      Barkley Rosser

  22. Anonymous6:23 PM

    Living in Scandinavia, this debate strikes me as a bit odd. I think it is fairly obvious that increased competition from abroad makes it more difficult to organise redistribution domestivally, but the experience from the Scandinavian countries is that it can still be done. (There have been certain changes in the way this is done, and inequality has increased somewhat, but the social model is still fully operational.) Hence, the changes that have taken place in the USA should be explained by political factors.

    1. Anonymous12:32 AM

      I totally agree.

      The fact that countries that aren't called America can have a thriving market and a welfare state (albeit many have been diminished of late [Australia for example]) demonstrates that 'data' is already available, one can simply look past one's borders.

    2. Yes, you can redistribute even in a more competitive environment, but there is a price to pay. All the welfare states, even the best managed Nordics, fell behind the US in the last 30 years, despite what conditional convergence would predict. On top of that, the best managed welfare states tend to be ethnically homogeneous, in other words, building a welfare state in the US would make us poorer overall and would necessarily involve social/economic exclusion (like in France) of the old/ young and the minorities. The US experience with the New Deal and minorities was not an accident.

      Finally, closing up of US economy would lead to the slow down in globalization with the attendant slowdown of global equality.

  23. I really despise this blogging platform that allows a person to type a long post and have it thrown into thin air without so much as a warning.

    You economists can go have your circle jerk now. You don't need the people anymore.

    1. Anonymous2:02 PM

      We never needed ill-informed and dim people like you.

  24. Oftentimes on the net you see either or fallacies. In this case it doesn't matter which caused income inequality, it matters how to remedy it._.That is if you care about aggregate human happiness , as it is relational. If you live in a rich area and your kid goes to a great school and my kid lives in a ghetto and goes to a bad, dangerous school I'm sad. And maybe I take a risky loan to buy a nice house and even the rich do as well. Housing bubble based on relational dynamics .

  25. Oftentimes on the net you see either or fallacies. In this case it doesn't matter which caused income inequality, it matters how to remedy it._.That is if you care about aggregate human happiness , as it is relational. If you live in a rich area and your kid goes to a great school and my kid lives in a ghetto and goes to a bad, dangerous school I'm sad. And maybe I take a risky loan to buy a nice house and even the rich do as well. Housing bubble based on relational dynamics .

    1. This is a great point, that could be applied to many situations.
      It often seems that the point of the argument is primarily to assign blame, with finding solutions a distant second, if it appears at all.

  26. Anonymous1:01 AM

    Is that you Pope Francis? Look, Corporatism was a reaction to the bourgeois state's failures at distribution. Most of you are probably modernists. You believe in mass production, materialism and money. Marxism was the evolution of this to the whole sphere of life.

    When some "conservative" whines about the sexual revolution. Tell them to blame bourgeois society. It values nothing more than materialism and decadent hedonism to make it work so we keep on producing. The US was a country founded on these principles with Ben Franklin being the ideal of a American. To many "leftists" by the 60's, that kind of hedonism and industrial society was no longer wanted. They bailed. Christians that were(are) smart bailed as well. Now we see cross currents of leftist/Christian alliances fighting climate change coming from mass production and the destructive fuel it needs to sicken society.

  27. Wow, the comments are quite something on that post.

    I note no one mentioned Vietnam, the end of Bretton Wood and the resulting oil crisis, with the failed response by most western governments. I think that the failure of Keynesian theories/practices to deal with the crisis then explains (in large part) the switch to conservative/neo liberal policies.

    And, from that, all evil ensued.

  28. Anonymous5:08 AM

    edit: "Koch (or if you prefer, union) funding ... is detrimental, why is that not a useful input..."

  29. "Third, people like to blame their political enemies for bad things, rather than nature or chance. Blaming the Koch brothers and the South for killing corporate welfare is more pleasing than blaming globalization, because doing the former gives us a reason to beat up on the Koch brothers and the South, while the latter does not."

    The latter attitude also gives liberals no hope. What's the point-if supposedly these are the product of these inevitable mechanical processes as inevitable as whether it's going to rain today then what's the answer? Just forget the whole thing and go to Starbucks?

    No offense, but it might be easier for guys like yourself or Miles Kimball to be so sanguine. The median American worker today is working in some crummy service job at MCDonalds or Dunkin Donuts.

    If most people were in a tenured job at some great university they would worry less about it anyway and say-'Guess that's just how it is.'

    I know you criticized being polemical in your other post but it just strikes me as a complacent attitude.

    1. If someone thinks the available "solutions" aren't really solutions, or that the problem is still too poorly understood to even define properly, it doesn't make much sense to call that person complacent.

      I am reminded of a John Wooden quote, "Never mistake activity for achievement".

    2. Anonymous2:03 PM

      Noah does not and will never have a tenured job.

  30. Metatone11:39 AM

    Surely the fact that the "competitor" nations were largely full of corporatist firms suggests that there are reasons to look for other dimensions of analysis than "corporatism"?

  31. Barkley Rosser is absolutely correct that it is historically anachronistic to refer to the system J.K. Galbraith describes in the New Industrial State as corporatism (although Noah is not the only commentator to do so). So, what to call that now largely defunct system? My own preference would be Agliatta’s term (which he borrowed from Gramsci), Fordism. Another option would be some variant of Galbraith’s countervailing power, from American Capitalism, e.g., countervalance. Robin Marris’s managerial capitalism (as opposed to contemporary shareholder capitalism) is good too. Certainly, his is the best analysis of the former and the transition to the latter that I have read. But Noah’s comments and questions are nevertheless spot on.

  32. I think the biggest problem liberals have with the globalization vs anti-labor argument is that globalization is a nonstarter to many for the simple fact that the argument goes from good labor vs evil capital to the decrease in global suffering at the expense of middle class blue collar US jobs.

    Which righteous battle would you want to be a part of?