Corruption & Inefficiency Under Fascism

Corruption and inefficiency are phenomena which we tend to associate with government. And yet, under a fascist system where many large businesses enjoy cushy relationships with government, we should not be surprised to encounter the exact same phenomena in those ostensibly “private” companies. When government instead of the consumer decides who survives and who fails, this is the inevitable result.

So how does government spread its ailments to the “private” sector? Here are a few of the most common approaches:

– Regulations restricting access to the industry (minimum capital, licenses, qualifications etc.)
– Regulations mandating the use of certain products and suppliers (think for example of all the regulations forcing doctors to use specific medications)
– Use of the courts to put weaker competitors out of business
– Bailing out well-connected companies
– Preferred access to government business
– Subsidized access to capital (think: Amazon)

All of the above apply, but the last one applies very broadly, and has a massive effect when real interest rates are subsidized as broadly as they have been in the last few years in Western Europe and North America. Calculating using honest measures of inflation, real interest rates for the favored few in these countries have been hovering around the -9% per annum range. This is a massive subsidy, and is the only reason why many of these inefficient corrupt entities have been able to survive against their smaller competitors. Booksellers in France complain about unfair competition, and to a certain extent they are right. How could Amazon finance interest rates of 10% per annum on its narrow margins? Probably not at all.

In the case of Amazon, we can be sure that a substantial portion of those “subsidies” goes towards capital investment and cushy salaries for leading executives. What percentage of these capital investments would make sense under a system where all market participants had equal access to the market for capital and had to real positive interest rates? While there is no precise way to calculate this, we can be sure that the answer is “a lot less”.

How much goes into corruption is unlikely to be a matter of public record.

As for the rest of the Fortune 500 set, I can confirm from personal experience that substantial amounts end up channeled into corruption – corruption which for the most part could not effectively exist without those massive subsidies. Deals with suppliers and landlords are regularly rigged, sometimes to the benefit of senior management and sometimes to the benefit of purchasing or other involved staff. It really doesn’t matter where the profits land; the result is the same. This continues despite the existence of fancy online bidding systems and the like. Plus ça change, plus c’est le même. And this should not surprise us.

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