Corporatism

Corporatism is where the society and economy of a country is organised into major interest groups (otherwise known as corporations – not to be confused with the word used to describe large businesses), and those interest groups should settle any problems through their representatives negotiating and making joint agreements.

In the UK corporatism was used after World War Two as a substitute for traditional socialism as a way to emphasize social justice without the radical solution of abolishing private property. Successive Prime Ministers gathered together the leaders of trade unions (representing the workers) and major businesses to collectively bargain on wages and prices.

Under the governments of Harold Wilson (Labour) and Edward Heath (Conservative), corporatism was used to attempt to achieve the central goal of full employment without that leading to too big a rise in wages and prices, which could lead to a wage-price spiral (higher prices leading to workers asking for higher wages, leading businesses to raise prices higher and so on). Policies included ‘voluntary wage restraint’ and also full-scale ‘incomes policies’ that restricted the amount wages could be raised.

Corporatism fell apart in the UK for two reasons. Firstly, both trade unions and businesses are self-interested groups whose first priority is to represent the interests and needs of workers and shareholders respectively. But also because the success of agreements made were affected by external influences such as the exchange rate – which could make oil and food more expensive regardless of what British industries did with prices, thus leaving trade unions needing to ask for higher wages.

Margaret Thatcher put an end to corporatism, in part because in only representing the needs of large businesses and trade unions, it ignored the needs of small businesses and the self-employed, who had no real representation. It was from these groups, ‘platoons’ as they were called, that Thatcher received much of her early support.