Corporatism, socialism and capitalism are the main economic systems in global operations today. Socialism is defined as public ownership and control of resources. On the other hand, capitalism is private ownership and control of resources. Corporatism is described as an economic system that allows private ownership and political influence.
The difference between corporatism and capitalism is based on economic circulation and role of organizations in a given state. Various scholars have outlined benefits associated with corporatism, while others have criticized its economic system. Despite the fact that corporatism fosters individualism, political connection is a key to be taken into consideration.
The paper will focus on reviewing existing literature concerning issue of corporatism. Acknowledgements and critics of corporatism will be reviewed. Case studies that have been presented by different scholars in regard to corporatism will be analyzed.
Most scholars describe economic transition as the one started with socialism then capitalism and finally corporatism. Despite the fact that capitalism is associated with more economic benefits, corporatism is widely accepted in most states.
According to Phelps and Zoegav (2013), corporatism fosters private ownership of resources and protects interests of some people. As a result, gap between rich and poor is likely to broaden in countries that promote corporatism. Based on article written by Phelps and Zoega (2013), corruption is legalized by corporatism systems. Corruption is perceived not as an effect of corporatism, but rather as its specific feature.
Since operations of corporatism allow intervention of government in management of privately owned resources, economic prosperity is enjoyed by industries with higher political connection.
The scholars attribute recession and economic stagnation as common processes in most states, especially those in Europe which are governed by corporatism systems (Phelps and Zoega 2013). Concern is given to large unions and organizations, while the less powerful activities are ignored.
Phelps and Zoega state (2013) that corporatism promotes innovation which is aimed at economic prosperity. There are those firms that governments favor and support, thereby giving them economic advantages over the other companies in the industry. As a result, emerging businesses that are less supported should be innovative following the basic directions set by firms that have prospered.
In this regard, policies are manipulated in a way that allows unfair market competition that leads to economic crises. However, corruption is less influential than economic rigidity and inequity in corporatism system are. Huge returns and profits are enjoyed by firms, which have a connection with political governance of a state.
According to Labeit (2011), innovation based on economic trends is enhanced and associated with economic stagnation in three main ways. States tend to yield to the demands and requirements of prosperous firms, which are not always likely to succeed in their plans’ application. For example, numerous economic projects that are successful in developed states have failed in developing states.
There is economic stagnation associated with this kind of controlled innovation since diversity is discouraged. Many economic opportunities remain unleashed due to focus on specification as opposed to diversification. Secondly, projects supported by a given state are not needed to secure similar support in developing states.
Notably, success and positive benefits associated with large firms have been overexploited, which have led to lower returns. Brand salience or loyalty is enjoyed by pioneer industries, thus new entrants are less likely to penetrate into global markets (Labeit 2011).
Kenworthy (2003) presents three objectives of corporatism. Corporatism is set to secure interests of stakeholders and other partners in organizations. Political influence ensures that stakeholders are protected from unfavorable environment, thus contributing to productivity and profitability. Notably, protection provided by state is not even, thus inequity emerges.
For example, shield from competition in corporatism means that some initiatives by industries that are not supported by government are hindered from active participation in markets. Thirdly, corporatism aims at increasing economic dynamics by supporting operations of organizations. In this regard, focus is shifted from individual interests to those of organizations.
Despite the fact that aims of corporatism are based on promoting economic growth, negative effects have still emerged. Phelps and Zoega (2013) have regarded negative effects of corporatism as manifestations of its nature. Notably, corporatism is accepted and supported by society. Economic dynamics is not evenly distributed in corporatism system.
Focus is placed on large unions, while penetration of new entrants into market is hindered. Economic growth is enjoyed by few firms that have political connection. Support given by governments to some corporations would encourage unfair competition.
For example, political manipulation could help large unions evade taxes as a way of increasing their profitability. In this regard, products of other firms that have no state support are less competitive in markets and are threatened to face challenges that may lead to their failure (Phelps and Zoega 2013).
There are approaches that tend to uphold goals set by corporatism. According to Kenworthy (2003), different states ensure that their local products are competitive in market. Corporatism focuses on increasing competitive advantage enjoyed by firms and organizations. Political perspective is essential in economic growth.
For example, policies ensure that environment is favorable for the business, thus increasing its productivity and profitability. In this regard, government is portrayed as a guarantor meant to control activities of firms. Unlike capitalism, interests are directed towards organizations in corporatism system.
Corporatism promotes economic dynamics since focus is put on large corporations as opposed to the idea of capitalism. Corporatism ensures that government influences activities, which are privately owned and thus more likely to promote economic growth (Kenworthy 2003).
Kenworthy states (2003) that corporatism remains the best option in promoting global economic prosperity. Global strategies are more likely to succeed if they are supported by political governance. It should be noted that economic policies meant to promote economic growth are based on domestic laws. Formation of corporations ensures that activities of privately owned operations are controlled by states.
Unlike Phelps, Kenworthy postulates (2003) that goals of corporatism are not meant to contribute to corruption and economic rigidity. According to Kenworthy (2003), negative issues associated with application of corporatism should not be generalized to show that it is the intended reason. For example, not all the states that advocate for corporatism negatively manipulate activities of private owned resources.
As a matter of fact, the scholar states that corporatism ensures that corporations are accountable to state, which is given responsibility of ensuring that welfare of citizens is not compromised (Kenworthy 2003). In this regard, negative effects of corporatism should be associated with poor interpretation of set goals and should not be used to describe nature of industrialization.
There are scholars who attempt to present case studies, which outline nature of economic systems practiced globally. Phelps and Zoega present (2013) an issue of internet search engines which constantly escalates. Developments of Google and that of Quaerro search engines have been scrutinized by various economists. Development of Google has been successful after its invention by two Stanford graduates in1994.
Quaerro developments have, however, been unsuccessful despite huge investment that has been directed to it. According to Phelps and Zoega (2013), invention of Google manifested potential innovation among less affluent that is normally suppressed in corporatism system. Kenworthy (2003) postulates that the reason why Google has become successful is because it is not centralized but is rather stimulated by innovation.
The issue of Quarreo was not similar to that of Google since it was controlled by state government. As a matter of fact, Querro search engine was meant to reduce Google dominance among Americans but not to manifest any creativity.
Success of Google can be attributed to majority of people who supported innovation and felt that they were appreciated for their operations. Since development of Querro was based on deceasing Google’s dominion and not innovation, it failed to penetrate into markets (Phelps and Zoega 2013).
There are further arguments that corporatism is a combination of capitalism and socialism, thus it is likely to present wide range of benefits. Corporatism was meant to increase economic growth by ensuring that operations in private corporations were regulated. Regulation is associated with reduced embezzlement, improved welfare and not necessarily corruption.
According to Kenworthy (2003), corruption arises due to poor implementation of corporatism principles. In this regard, solution is not based on eradication of corporatism but rather on ensuring that its principles are applied in a right way. Eradication of corporatism would mean that there was a transition to socialism or capitalism, which was not associated with economic stability.
The review concerning issue of corporatism has stirred many perceptions among the scholars. There are those who feel that capitalism is associated with more economic gains as compared to the benefits given by corporatism system. Despite the fact that socialism is still practiced by significant number of states, hot debate is held between capitalism and corporatism.
In both the systems, privatization is encouraged, but there is regulation of operations in corporatism. Corporatism allows intervention of political governance, which should never be underestimated. Scholars postulate that the main difference between corporatism and capitalism is in role played by government. In this regard, corporatism combines principles of capitalism and those of socialism.
Despite the fact that corporatism has showed essence of politics in economic prosperity, there are many challenges associated with it. On the other hand, capitalism has been challenged by various scholars and substituted with corporatism. There are concerns that corporatism is less advantageous than capitalism and deters innovation in population.
Corporatism is threatened by emergence of economic and political instability in some states. Those against corporatism argue that economic benefits gained are limited to small population.
Large population is expected to involve in activities of already existing firms, thereby reducing diversity and economic flow. In this regard, privatization allowed in corporatism has small impact since free operations associated with organizations are controlled by state.
Government support is essential in economic growth and should not be disregarded. Corporatism ensures that there is central intervention by government in operations of privately owned organizations. Government ensures that all the activities are implemented in accordance with legal parameters. In this regard, corporatism allows states to ensure economic stability in the country.
As opposed to capitalism that is associated with imperialism, corporatism is more likely to be supported by many states. However, governments need to ensure equitability of resources necessary in boosting innovation and economic prosperity. Corruption is not meant to be seen as a feature of corporatism but rather as an adverse effect of poor implementation of its principles.
Corporatism ensures that political interests are considered in promotion of economic dynamics. Corporatism ensures that domestic laws are acknowledged by existing organizations and reduce imperialism since profitability is not associated with few individuals.
However, focus should be placed on ensuring that political support rendered to organizations does not hinder emergence of new ideas. States should ensure that there is economic diversity and innovation, which should be shifted from individual to group representation.
Kenworthy, L 2003, “Quantitative Indicators of Corporatism”, International Journal of Sociology, vol. 33 no. 3, pp. 10-44. Web.
Labeit, M 2011, “Explaining the Difference between Capitalism and Corporatism”, Journal of economy policy, vol. 21, no.2, pp. 20-54, <https://www.economicpolicyjournal.com/2009/11/explaining-difference-between.html>.
Phelps, E & Zoega, G 2013, “Corporatism and Job Satisfaction”, Journal of Comparative Economics, vol. 41, no. 1, pp. 35-47, <https://www.sciencedirect.com/science/article/pii/S0147596713000073?via%3Dihub>.
This qualitative research essay on Corporatism