Associative State

THE TERM associative state describes a particular kind of partnership between firms and the government. In an associative state, the government promotes techniques of administrative management to rationalize production and distribution in industry. Firms and government cooperate to reshape the self-interest of industrialists to accord more closely with the public interest, in order to guarantee economic growth.

The idea of associationalism was first developed by Herbert Hoover as Secretary of Commerce in the 1920s. By rejecting the liberal model of laissez-faire, Hoover encouraged the formation of trade associations for the exchange of information about materials, production, and marketing that would have allowed corporations to contain prices while eliminating costly competition. As an engineer dedicated to efficiency, Hoover considered many aspects of competition among companies as wasteful, such as the inability of firms to create new technological developments, and the inability to take advantage of existing opportunities through simplification and standardization. Excessive economic individualism in the form of anarchic competition was in fact perceived by Hoover as the main cause of overproduction and unemployment. Nevertheless, the capitalistic economic system could have been reformed through voluntary association and cooperation, in which the government would have played a key role. In this regard, the role played by the state in an associative system was only a temporary one. The associative state was in fact needed only during the transitional phase. After having fulfilled its task as economic mediator, the associative state would have disappeared or been relegated to symbolic functions.

In order to establish an associative state, Hoover, as Secretary of Commerce, strategically used his department to reorganize the government to equip it with those tools necessary to improve government services for American businesses. This was achieved through a system of committees established to encourage organization and cooperation in the private business sector at different levels. Primarily, he encouraged the exchange of information regarding production and prices among American companies.

Second, Hoover promoted the establishment of industrial standards. This also included supplying companies with reports on opportunities in foreign trade and investment to enrich the informational climate so that the individual firm could become the main instrument of economic stabilization. Finally, Hoover used coercive regulatory power to rationalize “sick industries” such as coal and to stimulate new infrastructure industries such as aviation and radio broadcasting to promote consumption.

As president, Hoover retreated from the associative vision after many of his projects failed for lack of funding. However, the idea of associationalism did not fade away. Instead, it was ironically carried out by Hoover's successor, Franklin D. Roosevelt. Among the several initiatives promoted by the Roosevelt administration associated with the notion of associative state, the most important was the drafting of the National Industrial Recovery Act (NIRA) in 1933, with which the government empowered trade associations and private businesses to draft codes of fair competition under the supervision of a National Recovery Administration (NRA). The vagueness of its statute, however, sparked a huge debate among political and economic forces regarding the true nature of the NIRA. For the associationalists, it was a genuine attempt of self-government for the industry. For its detractors, it was an instrument in the government's hands to control the industry. The debate over the nature of the NIRA ended two years later, when the NIRA was declared unconstitutional in 1935.

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