There is a helpful article today from the Mises Institute titled “The Vampire Economy and the Market.” The author’s point is to contrast what he calls “authoritarian capitalism” or fascism with “liberal capitalism” or the free market.
Fascism works by creating a ‘partnership’ between business and the state which always tends toward the state absorbing business to make it almost a department of the state. With this fusion comes the breakdown of any significant sense of law or justice. Under liberal capitalism, the court system could serve as an outside and impartial referee for the participants in the business world. But this is not possible when when the state has absorbed the business world, because the court system is neither outside nor impartial.
Under fascism, although the state has ultimate control of all property, business owners can still enjoy increased consumption because the fascist state does not typically consume all the profits of business. But this only means that business ‘owners’ have a great motive to use their profits to buy influence in the state. In fact, a new business skill is born and is required in fascism: political entrepreneurship. This is the ability to forge the right kind of relationships with those in power in the state. So now business is not devoted solely to serving the customer. Now business must first of all serve the state.
Thus business cannot be ‘law abiding’ because the problem is the law itself, which is designed to defeat business. For business to continue to any extent, it must find ways around the law. So instead of making things consumers want, the business of business becomes dealing with the state. The leads to economic decline, which often gives the state the pretense for further intervention into the world of business. And so the spiral downward will continue.
That is my summary of the article with a few of my own extrapolations inserted. I am not a fan of the term “capitalism” for reasons I won’t review here. But that aside, it seems to me that a significant part of those who find fault with “capitalism” do not realize that what they object to is the authoritarian capitalism that we have grown accustomed to over the last seventy years or so, not the free market.
We haven’t experienced anything even close to the free market for so long we can’t imagine what it would be like.