Summary: Murray N. Rothbard, “Government-Business ‘Partnerships’”

This file is a single polemical economic-history chapter. Its scope runs from early modern mercantilism through the American Civil War, the National Banking System, Progressivism, the Federal Reserve, and the Bush administration. Rothbard’s central thesis is that “partnership” between business and government is not a modern reformist compromise but the recurring form of political privilege: the state expands power while favored firms receive monopolies, subsidies, contracts, cartel protections, and bailouts.

The “partnership of government and business” is a new term for an old, old condition.

Rothbard begins by redefining the phrase itself. “Partnership” sounds cooperative and public-spirited, but he treats it as a euphemism for mercantilism: a system in which political authority restricts market entry and consumer choice to enrich selected private interests. His first conceptual move is therefore demystification. Big Government is not merely anti-business, nor is business support for intervention accidental; intervention often exists precisely to create privileged business clients.

But what we tend to ignore is that the point of many of these controls was to tax and restrict consumers and most merchants and manufacturers in order to grant monopolies, cartels, and subsidies to favored groups.

The historical model is mercantilist Europe. Kings sold monopoly grants and tax-collection privileges because governments were “chronically short of money”; politically connected recipients then used state coercion to exclude competitors. Rothbard’s example of tax farming sharpens the point by complicating simple pro-privatization rhetoric. A government function transferred to a private firm is not thereby made just. If the function is coercive, efficiency may make it worse.

In our enthusiasms for privatization, by the way, we should stop and think whether we would want certain government functions to be privatized, and conducted efficiently.

The chapter then shifts to the United States. Rothbard contrasts the early republic’s freer order with the Civil War transformation, arguing that Lincoln’s Republican administration used wartime conditions to enact the Whig-Republican “American System”: tariffs, excise taxes, railroad subsidies, fiat money, income taxation, and banking centralization. The opposition between nineteenth-century Democrats and Whig-Republicans is central to his structure: Democrats appear as the party of laissez-faire, while Republicans become the vehicle of government-business fusion.

In this way, the system of minimal government, free trade, no excise taxes, a gold standard, and more or less free banking of the 1840s and 1850s was replaced by its opposite.

Rothbard gives special attention to banking because it links wartime finance, corruption, and later central banking. Jay Cooke’s role as bond underwriter exemplifies the pattern: state privilege creates private fortunes, while private beneficiaries lobby for structures that perpetuate state finance. The National Banking System is presented not as a neutral modernization but as a politically designed mechanism for inflationary credit and government bond demand.

The National Banking Act, by design, was a halfway house to central banking, and by the time of the Progressive Era after the turn of the twentieth century, the failings of the system enabled the establishment to push through the Federal Reserve System as part of the general system of neo-mercantilism, cartelization, and partnership of government and industry, imposed in that period.

The essay’s final movement carries the argument into the twentieth century and Rothbard’s present. Progressivism, World War I collectivism, the income tax, regulation, cartelization, and the Federal Reserve all become stages in a continuous neo-mercantilist order. The Bush administration is not treated as a deviation from free-market Republicanism, but as the inheritor of an old Republican establishment tradition: taxes, inflation, monetary manipulation, regulation, contracts, and bailouts for favored firms.

It is still playing the old “partnership” game—and still, of course, at our expense.

The relevance of the chapter lies in its refusal to separate “pro-business” policy from statism. Rothbard’s target is not commerce but political capitalism: the alliance of state coercion and private advantage. His core conceptual move is to distinguish the free market from business privilege, and to argue that many policies sold as development, modernization, stabilization, or public-private cooperation are better understood as transfers from consumers, taxpayers, and excluded competitors to politically connected firms.