Corporatism is a form of government that traditionally has been closely allied with Fascism. Companies are allowed to exist and control markets under the guidance and approval of the State. They are allowed to profit as long as their operations fall in line with the Ideology of the existing power structure. Examples are Nazi Germany and Mussolini's Italy.
Corporate Socialism is a system in which Corporations are "chartered" by the State and aided in their enterprises by tax preferences, subsidies and overall beneficial actions of the State. The Government, while not always fundamentally Socialist, utilizes the corporate structure to satisfy the needs of its people. The Socialist agenda is realized through the workings of the Corporation. The government struggles to ask more in terms of the needs of the people and the Corporations lobby for greater profits and more self determination.
When government intervenes to "bailout" corporations that are approaching or surpassing insolvency, the workings of the market are being dismissed. The market will naturally eliminate less efficient companies and more efficient ones will move in to take their place. This competitive nature of the marketplace assures that the production and distribution of goods in the economy are determined by those who purchase those goods, the consumer. Subsidizing or rescuing corporations that have made enough bad business decisions to jeopardize their credibility in the marketplace, removes this power of choice from the consumer and bestows it on the corporations and the government.
"Moral Hazard" is the term used to describe the effects of repeated bailouts. With the possibility of a government rescue in the back of their minds, firms lose the fear of risk. Instead, they take a cavalier approach which allows them to experience greater return. Other firms must compete in the same climate, and the attitude spreads, creating a higher rate of failures and subsequent bailouts.
Other corporations feel that they should also be compensated. The argument does have some bearing and soon they are also receiving a subsidy or favorable tax treatment. There is no end to this slide into one of the two categories of Socialism mention above. In economics as in most things, precedents are extremely influential in later action.
There is never a valid reason for government intervention to rescue corporations. The "too big to fail" argument, is simply an admittance that government actions and intervention have been going on for a long period. No firm in a real marketplace can ever be too big to fail. True competition would never allow this. Any company that grows, requires sizable profits and sizable profits are always endlessly chased by many until they are no longer sizable. The acknowledgement that a corporation is so big that its demise could endanger the entire economic system, is proof that there has been no market forces in place.
On the other hand, we really don't have any idea if this too big situation is even a valid truth. It may be simply an excuse for maintaining the existing status quo and power structure. Corporatism is not a system of change. It is a system in which "selected" companies are allowed to continue their operations under the auspices of the State. Change would suggest an actual market, not a controlled market. And, it is certainly possible those "experts" who tried to instill the fear of collapse into our hearts, don't really know much more than we do. After all, no matter the circumstances, the future is extremely hard to predict and economists and political leaders have traditionally been some of the worst at foretelling future events.
What is certain, is that the current economic situation was a window of opportunity for great change in our economy. The possibility of a market correction, that while trying, would in the end leave us with a much more streamlined and efficient system; geared to the needs of the consumers and not the power elite, has slipped right through the fingers of our decision makers. Instead, hundreds of billions of our hard earned taxpayer dollars have been spent or promised to prop up a corporate financial system that was the cause of the predicament in the first place. And we were never really asked what we thought about it!