When politicians and political commentators engage in debate over economic policy, they often mistake what the actual lines of battle are. They assume that the fight is Big Government versus Big Business — that as one great power grows, the other diminishes.
This is ahistorical, and often wrong in today’s policy debates, where often at least one faction of the business lobby supports Big Government policies, and where the growth of government often entrenches the big businesses.
Many economic thinkers have understood this, and many policymakers have openly advocated an economic policy best called corporatism, in which the state increases its control over the economy, and uses large corporations as a tool for accomplishing its ends.
During World War I, plenty of government and industry leaders in America fantasized about state-controlled industry, where we set aside such “destructive” and “irrational” practices like competition. In the decades that followed, this idea took hold most firmly in fascist Italy.
Today, I came across this important passage from Nobel economist Edmund Phelps in his book Mass Flourishing:
So when some politician, Left or Right, points to industry support of some government intervention (a regulation, a mandate, or a subsidy), remember this — Big Business and Big Government are often natural allies, and their enemy is free enterprise and smaller competitors.
