Interventionism: An Economic Analysis by Ludwig von Mises

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V. CORPORATIVISM AND SYNDICALISM

1. Corporativism

CORPORATIVISM[1] IS A PROGRAM, not a reality. This has to be stated at the very beginning to avoid misunderstandings. Nowhere was it attempted to translate this program into actuality. Even in Italy, in spite of the constant propaganda talk, nothing has really been done to establish the system of the corporative state (stato corporativo).

    It has been attempted to characterize the different political and economic ideologies as peculiar to certain nations. Western ideas have been contrasted with the German and Slavic ideas; a difference was supposedly discovered between the Latin and the Teutonic mentality; particularly in Russia and Germany there is talk of the mission of the chosen people which is destined to rule the world and to bring it salvation. In view of such tendencies it is necessary to emphasize that all political and economic ideas which dominate the world today have been developed by English, Scottish, and French thinkers. Neither the Germans nor the Russians have contributed one iota to the concepts of socialism; the socialist ideas came to Germany and Russia from the West just as did the ideas which many Germans and Russians today stigmatize as Western. The same is true of the program of corporativism. It stems from English guild socialism and it is necessary to study the writings of this today almost-forgotten movement in order to obtain information about the basic ideas of corporativism. The Italian, Portuguese, and Austrian publications, party programs, and other commentaries concerning the corporative state lack precision of meaning and avoid exact formulations and statements; they gloss over the real difficulties by making wide use of popular slogans. The English guild socialists, however, show more clarity in the presentation of the program, and Sidney and Beatrice Webb have given a complete statement of the aim and operation of this system.[2]

    In the corporativist utopia the market is replaced by the interplay of what the Italians call corporatives, that is, compulsory organizations of all people engaged in a certain industry. Everything that concerns this industry only, that is to say, the internal affairs of the individual corporatives, is handled by the corporative itself without interference from the state or from persons not belonging to the particular corporative.[3] The relations between the different corporatives are regulated by negotiation between them or by a joint conference of representatives of all corporatives. The state, that is the parliamentary body elected by general vote and the government responsible to it, does not intervene at all, or only when the corporatives fail to reach an agreement.

    In drawing up their plans the English guild socialists had in mind the pattern of English local government and its relation to the central government. They proposed creating self-government of the individual industries. Just as the counties and cities take care of their own local affairs the individual branches of production would administer their internal affairs within the structure of the whole social organism.

    But, in a society which is based on division of labor there are no internal problems of individual businesses, enterprises, or industries which would concern only those connected with such businesses, enterprises, or industries and would not also affect the other citizens. Everybody is interested in seeing that each single business, enterprise, and industry be run as efficiently as given conditions permit. Every waste of labor and material in any industry affects each individual citizen. It is impossible to leave the decisions over the choice of production methods and of the kind and quantity of the products solely to those engaged in an industry because such decisions concern everybody, not only the members of the vocation, the guild, or the corporative. While the entrepreneur of the capitalist economy is boss in his own business he nevertheless remains subject to the law of the market; if he wants to avoid losses and to make profits he has to endeavor to fulfill the wishes of the consumers as well as possible. The corporatively organized industry which would not have to fear competition would not be the servant but the master of the consumers if it were free to regulate at will the internal problems which supposedly concern it exclusively.

    The majority of the proponents of the corporative state do not want to eliminate the entrepreneurs and the owners of the means of production. They want to establish the corporative as the organization of all individuals engaged in a particular line of production. Disputes between the entrepreneur, the owners of the capital invested in the industry, and the workers concerning the disposition made of gross profits and the distribution of incomes among these different groups are in their opinion merely internal problems which are to be settled autonomously within the industry without the interference of outsiders. How this is to be done, however, is never explained. If entrepreneurs, capitalists, and workers within a corporative are to be organized into separate groups or blocs, and if negotiations are to be carried on between these blocs, agreement will never be reached unless the entrepreneurs and capitalists are willing voluntarily to relinquish their rights. If, however, decisions are to be made directly or indirectly (by the election of committees) by the vote of all members with each individual having the same voting power, then the workers, being more numerous, will outvote the entrepreneurs and the capitalists and will overrule their claims. Corporativism would thus take the form of syndicalism.*

    The same is true of the problem of wage scales. If this thorny question, too, is to be decided by general vote with every individual engaged in the industry having equal voting power, the result will most likely be equality of wages irrespective of the kind of work performed.

    In order to have something to distribute and to pay out, the corporative must first have receipts through the sale of its products. The corporative occupies in the market the position of sole producer and seller of the goods which belong to its line. It need not be afraid of the competition of producers of identical goods because it has the exclusive right to engage in such production. We would therefore have a society of monopolists. This need not mean that all corporatives would be in a position to exact monopoly prices; but many industries would be able to exact monopoly prices and to realize monopoly profits of various amounts. The corporative organization of society will therefore give particular advantages to certain branches of production and those engaged in them. There will be industries which by restricting production will be able to increase so considerably their total receipts that those engaged in this industry will have a relatively larger share in the total consumption of the country. Some industries may even be able to achieve an absolute increase in consumption for their members despite a fall in total production.

    This is sufficient to establish the shortcomings of the system of corporativism. The individual corporatives do not have any motive to make their production as efficient as possible. They are interested in reducing the output so that they may realize monopoly prices; it depends on the state of demand in the particular industry whether those engaged in the one or in the other corporative will fare better. The position of the corporatives will be the stronger the more urgent the demand for their products; the urgency of the demand will make it possible for some of them to restrict production and still to increase their total profit. The entire system would eventually lead to an unrestricted despotism of the industries producing goods which are vital in the strict sense of the word.

    It is hardly to be believed that a serious attempt would ever be made to put such a system into actual operation. All proposals for a corporative system provide state intervention, at least in the case that an agreement cannot be reached between the corporatives in matters concerning several or all of them.[4] Among these matters prices certainly have to be included. It cannot be assumed that an agreement on prices could be reached between the corporatives. If the state has to intervene, however, if the state has to fix prices, then the whole system loses its corporative character and becomes either socialism or interventionism.

    But the price policy is not the only point which shows that the corporative system cannot be made to work. The system renders all changes in the productive process impossible. If demand has changed or if new production methods are to replace the old ones, capital and labor have to be shifted from one industry to another. These are questions which exceed the limits of a single corporative. Here an authority superior to the corporatives has to intervene and this authority can only be the state. If, however, the state is to decide how much capital and how many workers each individual corporative is to employ, then the state is supreme, not the corporatives.

2. Syndicalism

    The corporative or guild socialist system thus turns out to be syndicalism. The workers engaged in each industry are to receive control of the means of production and are to carry on production on their own account. It is unimportant whether the former entrepreneurs and capitalists are to be given a special position in the new order or not. They can no longer be entrepreneurs and capitalists in the sense in which there are entrepreneurs and capitalists in the market economy. They can only be citizens who enjoy privileges in decisions concerning management and the distribution of income. The social function, however, which they fulfilled in the market economy, is taken over by the totality of the corporative. Even if in the corporative only the former entrepreneurs and capitalists had the right to make decisions and if they were to receive the largest share of the income, the system still would be syndicalism. It is not the economic characteristic of syndicalism that every syndicalist receives an equal income, or that he is consulted in questions of business policy; essential is the fact that the individuals and the means of production are rigidly attached to specific lines of production so that no worker and no factor of production is free to move from one line into another. Whether the slogan “the mills for the millers, the printing plants for the printers” is to be interpreted so that the words “millers” and “printers” are also to include the former owners of the mills and printing plants or not, and whether these former entrepreneurs and owners are given a more or less privileged position, does not matter. Decisive is that the market economy, in which the owners of the means of production and the entrepreneurs as well as the workers depend on the demands of the consumers, is being replaced by a system in which the demands of the consumers no longer determine production, but by a system in which only the wishes of the producers prevail. The cook decides what and how much each individual is to eat. Because the cook has the exclusive right to prepare food, if anyone refuses the food he is given, he would starve. Such a system might still have some meaning as long as conditions remain unchanged and as long as the distribution of capital and labor among the different lines of production corresponded to some extent to the conditions of demand. But changes are always taking place. And every change in the conditions renders the system less workable.

    The postulate of syndicalism that the ownership of the means of production should be taken over by the workers is but symptomatic of the opinion of the productive process which the workers gain from the narrow perspective of their position. They regard as a permanent institution the shop in which they daily perform the same duties; they fail to realize that economic activity is subject to constant change. They do not know whether the enterprises they are working for are making profits or not. How else could the fact be explained that the employees of railroads operated at a loss demand “the railroads for the railroad employees”? The workers naively believe that only their work produces returns and that the entrepreneurs and capitalists are merely parasites. Psychologically this may explain how the ideas of syndicalism were conceived. But this understanding of the origin of the idea of syndicalism still does not turn the syndicalist program into a workable system.

    The syndicalist and the corporative systems are based on the assumption that the state of production which is in effect at a given time will remain unchanged. Only if this assumption were correct would it be possible to do without shifting capital and labor from one industry into another. And to make such changes, decisions must be made by an authority superior to the single corporative and syndicate. No reputable economist therefore has ever attempted to call the syndicalist idea a satisfactory solution of the problem of social cooperation. The revolutionary syndicalism of Sorel* and of the advocates of the action directe have nothing to do with the syndicalist social program. Sorel’s syndicalism was a system of political tactics having as its aim the attainment of socialism.

    English guild socialism flourished for a brief period and then disappeared almost completely. Its original proponents themselves abandoned it, obviously because they became aware of its inherent contradictions. The corporative idea today still plays a role of some importance in the writings and in the speeches of politicians, but no nation has attempted to put it into operation. Fascist Italy, which most emphatically extols corporativism, imposes orders of the government upon all economic activity. There is therefore no room left for the existence of autonomous corporatives in “corporative” Italy.

    There is a general tendency today to attribute the term “corporative” to certain institutions. Organizations which serve in an advisory capacity to the government, or cartels which are created by the governments and operate under their supervision, are called corporative institutions. But they too have nothing in common with corporativism.