Corporatism was a social theory and practice, especially in Fascist Italy in the 1930s, that divided society into corporations, or groups according to economic functions (such as unions, professional associations, business interests, etc.). In corporatism the corporations regulate member activities and represent their interests to the state. The state coordinates the whole society through balancing of corporate needs and contributing to the entire nation. It was a modification of the medieval Catholic view of society with recognized corporations in Canon law (church orders, trade guilds, colleges, towns, etc.). Fascist Italy under Benito Mussolini tried to adapt this social system of the Middle Ages to modern capitalist, industrial society.

Fascist corporatism hoped to avoid both Marxist communism and capitalist liberal democracy through this "middle-way" system. Hegel's political philosophy influenced corporatist fascism by viewing the state as reconciling groups in national unity. Within this system, corporations have an exclusive monopoly over a certain economic activity. So, unlike capitalist economics in which businesses compete, a corporatist economy composed of, say, several steel companies would have a single steel monopoly run by that steel manufacturing corporation under the general management of the state. Such corporatism seemed more orderly than competitive market capitalism and secured greater employment security for workers. The New Deal in the United States in the 1930s under President Franklin Roosevelt allowed some corporate monopolies in major industries and large labor unions (earning it the label fascist by some conservatives), but the U.S. economy remained overall capitalist. The disadvantage of corporatism was its less innovative, less productive, and more inflexible qualities, compared with free-market capitalism.

In the political sphere, corporatism relied on greater management of the corporate monopolies by the central state. This is contrasted with the pluralism politics of liberal democracies in which many interest groups lobby the government and the state serves as a "referee" among competing interest groups. Again, the corporatist fascist state claimed to be more secure, orderly, and just (representing the interests of the whole society) than either liberal, capitalist democracies or class-based Marxist socialist or communist societies. Liberal democracies (such as the United States and Britain) criticized fascist corporatism for being too authoritarian and monopolistic; communists criticized it for subjecting labor unions to the state and preventing working class revolution.

Several contemporary nations retain elements of corporatism, usually through strong labor unions and business associations that negotiate with the government for legal and economic benefits. Sweden and Austria, as well as some Latin American nations, exhibit considerable social corporatism. The United States and Great Britain are the least corporatist countries on Earth; the individualism and market-oriented economics of these countries make them less likely to be corporatist. The European community shows increasing signs of corporatist structures. Most modern corporatist systems rely on high levels of state taxation and extensive social welfare services.

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