What type of Economic System are we heading towards?

I have been trying to pinpoint it for a while. What do you call a government that does not eliminate the markets, but instead simply controls the markets with an iron fist?

At first look, one might say we are just “regulating” capitalism. Sarbanes-Oxley is a prime example of this. While the law makes some tough regulations and requirements, it does not try to direct the flow and direction of the businesses themselves. Sarbanes-Oxley is simply an example of regulating capitalism. Whether or not you agree with the law, one could not conclude that this law is in itself a rejection of capitalism.

On the other hand, recent actions by the financial and regulatory bodies, as well as actions by the United States congress and president have been looking a lot more like socialism than capitalism. The request by the Obama administration for congress to give the treasury secratary the power to sieze companies that are “in the national interest.”

So what do you call a system of government where the government does not directly oppose free markets but instead seeks to control the players in free markets, and when necessary, take over companies in the name of national interest?

This question has been on my mind off and on for a while now. We always talk about communism/socialism, and we always talk about capitalism. We learn that most governments fit into these molds. France = Socialist, China = Communist, Australia = Capitalist…

But, some behaviors of government do not really fit the mold. For example, Benito Mussolini’s Italy showed tendancies of socialism, but also chose not to eliminate the appearance of the free markets.

What Mussolini’s government embraced was a type of government known as Fascism. According to Mussolini:

The foundation of Fascism is the conception of the State, its character, its duty, and its aim. Fascism conceives of the State as an absolute, in comparison with which all individuals or groups are relative, only to be conceived of in their relation to the State…

…The Fascist State organizes the nation, but leaves a sufficient margin of liberty to the individual; the latter is deprived of all useless and possibly harmful freedom, but retains what is essential; the deciding power in this question cannot be the individual, but the State alone.

The proposed and instituted policies of the U.S.  are more similar to Mussolini’s government than the Communism of the Soviets or the Socialism of the French.

Sheldon Richman’s article on Fascism in the Concise Encyclopedia of Economics gives a good description of the Fascist aspect of Franklin Roosevelt’s New Deal:

In the United States, beginning in 1933, the constellation of government interventions known as the New Deal had features suggestive of the corporate state. The National Industrial Recovery Act created code authorities and codes of practice that governed all aspects of manufacturing and commerce. The National Labor Relations Act made the federal government the final arbiter in labor issues. The Agricultural Adjustment Act introduced central planning to farming. The object was to reduce competition and output in order to keep prices and incomes of particular groups from falling during the Great Depression.

It is a matter of controversy whether President Franklin Roosevelt’s New Deal was directly influenced by fascist economic policies. Mussolini praised the New Deal as “boldly . . . interventionist in the field of economics,” and Roosevelt complimented Mussolini for his “honest purpose of restoring Italy” and acknowledged that he kept “in fairly close touch with that admirable Italian gentleman.” Also, Hugh Johnson, head of the National Recovery Administration, was known to carry a copy of Raffaello Viglione’s pro-Mussolini book, The Corporate State, with him, presented a copy to Labor Secretary Frances Perkins, and, on retirement, paid tribute to the Italian dictator.

Most of the New Deal is still in existence today. The current economic crisis has been a catalyst for further fascization of the U.S. economy. When congress decided to bail out certain companies, but reject others in the same industries, it crossed a line. When President Obama ordered Rick Wagoner out of General Motors, the U.S. government crossed a line.

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