Corporatism at Work

Alex Tabarrok, in discussing business cycles, made an interesting observation.  He wrote:

In the United States, for example, sales of the top 100 firms account for about 30% of GDP.  (The share is even larger in most other developed economies.)

What caught my eye was that the 100 largest corporations represent a higher percent of the economy in other developed countries.  That’s because we have generally managed to keep our economy very competitive whereas many so-called sophisticated countries, particularly in Europe, have used the power of government to privilege certain companies at the expense of others.  It’s an economic arrangement generally known as Corporatism and it was, interestingly, a system promoted by fascists such as Benito Mussolini.

Unfortunately, we’re likely to see more of this in the U.S. as the power of government increases.  It’s entirely predictable.  As Congress meddles more in the economy it has the power to make or break individual companies and whole sectors of the economy.  Corporations aggressively lobby Congress not just to protect their interests but to give themselves advantages over their competitors.  This invariably gives big businesses a huge advantage over smaller competitors. 

I wonder how many lefties realize their preferred policies actually empower big business.  I’ll guess very, very few.  The left generally only understands intentions.  Cause and effect isn’t their strength.

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