The United States is often touted as a capitalist country, where prices, production, and distribution of goods are decided by competition in a free market. But with smaller companies closing during this economic downturn and greedy corporations receiving bailouts from the government, our capitalism is quickly becoming corporatism.

According to the Merriam-Webster Online Dictionary corporatism is an economic system in which the government exercises control of the market, not through the socialization of industry but through indirect control of private corporations. Capitalist free-market policies usually advocate laissez faire government involvement, meaning there should be no government
intervention or restrictions imposed on industry.

At the end of last year, several big corporations were on the verge of bankruptcy which threatened the economic stability of the U.S. financial markets. Ultimately, taxpayers shelled out billions of dollars to prop up the failing institutions, in effect rewarding failure, as the government increased its power over industry.

“The [Bush] administration says Bear Stearns, AIG, Citigroup and other big Wall Street firms are ‘too big to fail.’ They can take dramatic risks and the taxpayers will cover them,” David Boaz wrote in the Dec. 17, 2008, issue of the Investors Business Daily.

While Bush bailed out several fat cat corporations, many mom and pop shops that couldn’t afford to stay afloat were forced to close. Between the Zajic Appliance Center, across the street from Dairy Queen, and the Fruitridge Boulevard light rail station is one such shop, Sew and Vacuum, that has become a victim of the most recent economic downturn.
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Its bailout was apparently overlooked.

President Obama furthered the progression toward corporatism when he bailed out GM and Chrysler. According to a June 1 article on Bloomberg.com, the U.S. government holds a 60 percent stake in GM’s equity, making it the biggest shareholder of the company. Obama later exercised his administration’s indirect power over industry when he pressured then GM CEO Mike Allen to resign from his position March 29, effectively firing him.

While many are leery of corporatism, it is important to realize that some governmental oversight of the private sector is necessary. This is evidenced by the passage of various antitrust laws which have helped thwart monopolies and encourage competition. The U.S. oil industry serves as an example of how moderate government regulation can be beneficial.

In the late 1800s and early 1900s, the majority of domestic oil refineries was owned by John D. Rockefeller. There was little room for small businesses to gain a foothold in domestic oil because the U.S. oil market was already cornered. With the passage of antitrust laws, including the Sherman Act of 1890, Rockefeller’s oil monopoly was broken up and new companies sprung up again, including Exxon Mobil and Chevron.

So next time you hear someone complaining about corporate bailouts, publicly financed golden parachutes for CEOs, and the special interests paid to industry and their lobbyists by the government, remember, these are not the failings of capitalism but of corporatist influenced policies.