Corporatism and the Ghost of the Third Way

An economic system called corporatism arose in the late 19th century, promoted by Anti-Cartesian French intellectuals dismayed with the "disenchantment of the world" Weber attributed to capitalism, and by a Roman Catholic church equally dismayed with both liberalism and socialism. Corporatism recognizes the innate inequality of human beings and their need for secure places in a legitimate hierarchy and thus puts the police power of the state behind officially sanctioned Corporations, elite-controlled industrial group cartels empowered to set wages, prices, employment, and quotas, to regulate entry, and to limit imports. Corporatism was to end the class struggle by guaranteeing workers their accustomed jobs and incomes and by delegating traditional authority through a principle of subsidiarity. We argue that countries that adopted corporatism most fully -- those with Roman Catholic majorities or French-educated elites -- experienced substantial financial development reversals and retain legacy Corporatist institutions that continue to retard financial development and growth.