The term corporatism has different meanings in different contexts. Most notably, the historical usage of the term is not the same as its modern usage. This article deals with both types of "corporatism".
Historical meaning of the term
Historically, corporatism or corporativism (Italian corporativismo) is a political system in which legislative power is given to corporations that represent economic, industrial, and professional groups. Unlike pluralism, in which many groups must compete for control of the state, in corporatism, certain unelected bodies take a critical role in the decision-making process. This original meaning was not connected with the specific notion of a business corporation, being a rather more general reference to any incorporated body. The word "corporatism" is derived from the Latin word for body, corpus.
Ostensibly, the entire society is to be run by decisions made by these corporate groups. It 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 Catholic trade unions which were organised in the early twentieth century to counter the influence of trade unions founded on a socialist ideology.
Gabriele D'Annunzio and anarcho-syndicalist Alceste de Ambris incorporated much of corporative philosophy in their Constitution of Fiume.
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 allow unrestricted capitalism, owing to the feudalist and aristocratic tradition of giving state privileges to the wealthy and powerful.
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.
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. Also see neofeudalism.
This use of the term "corporation" is not exactly equivalent to the restricted modern sense of the word. Compare corporate state and militarism. Corporate in this context is intended to convey the meaning of a "body," as in corpus. Its purpose is to reflect more medieval European concepts of a whole society in which the various parts each play a part in the life of the society, just as the various parts of the body play specific parts in the life of a body.
Some elements of corporatism can be found still existing today, for example in the ILO Conference or in the Economic and Social Committee of the European Union, the collective agreement arrangements of the Scandinavian countries, or the Republic of Ireland's system of Social Partnership.
Elements of corporatism may also be found in the United States, where corporations representing many different groups exist to influence legislation through lobbying. There are corporations representing, for example, organized-labor, educators, gun-rights advocates, and business interests. While these corporations have no membership in any legislative body, they can often wield considerable power over law-makers.
Contemporary meaning of the term
Today, corporatism or neo-corporatism is used in reference to tendencies in politics for legislators and administrations to be influenced or dominated by the interests of business enterprises (limited liability corporations). The influence by other types of corporations, such as those representing organized labor, is 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. In this sense of the word, corporatism is also termed corporatocracy. If there is substantial military-corporate collaboration it is often called militarism or the military-industrial complex.
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 another modern use of the term, which has appeared in recent literature of political science and sociology, "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 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 Sweden, Austria, Norway, Ireland, and maybe the Netherlands fit this classification. In the work of some scholars, such as Peter 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.
It is called neo-corporatism because it shows a number of similarities with corporatism in the historical meaning of the word (see above).
Free Market theorists like Ludwig von Mises would describe corporatism as anathema to their vision of capitalism. In the kind of capitalism such theorists advocate, what has been called the "night-watchman" state, the government's role in the economy is restricted to safeguarding the autonomous operation of the free market. However, many critics of free market theories, such as George Orwell, have argued that corporatism (in the sense of an economic system dominated by massive corporations) is the natural result of free market capitalism.
In the United States, some  (http://www.frontpagemag.com/Articles/ReadArticle.asp?ID=3054) claim that Franklin Delano Roosevelt’s New Deal programs were an unprecedented jump towards a corporate state. However, this ignores the long history of narrow economic interests controlling the decision-making process in America. In recent times, the profusion of lobby groups and the increase in campaign contributions has led to widespread controversy and the McCain Feingold act. American corporatism is evidenced in the close ties between members of the Bush Administration and many large corporations, such as Halliburton.
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.
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.
- publiceye.org discusses this article, and provides copious references on the subject (http://www.publiceye.org/fascist/corporatism.html)
- Constitution of Fiume (http://sources.wikipedia.org/wiki/Constitution_of_Fiume)
- Rerum Novarum: encyclical of pope Leo XIII on capital and labor (http://www.vatican.va/holy_father/leo_xiii/encyclicals/documents/hf_l-xiii_enc_15051891_rerum-novarum_en.html)
- Quadragesimo Anno: encyclical of pope Pius XI on reconstruction of the social order (http://www.vatican.va/holy_father/pius_xi/encyclicals/documents/hf_p-xi_enc_19310515_quadragesimo-anno_en.html)