Argument for my conservative and libertarian friends
Dean
My conservative and libertarian friends--with whom I closely ally on many issues--often miss an etraordinarily powerful argument that my leftish friends often miss.
In fact, it's not even an argument: it's just a fact.
Corporations do not exist in common law. They do not exist in the Magna Carta or the Constitution. Indeed, they exist almost nowhere in anyone's arguments about the value of free markets.
There is a very simple, very indisputable fact of history and law:
Corporations are not a free market phenomenon. They are a creation of THE STATE. Indeed, their very existence depends upon THE STATE, i.e. THE GOVERNMENT.
This is a simple, indisputable fact of history and law. Not to mention practical reality.
Corporations are a creation of social policy by the state. They are not a free market phenomenon. Their very existence depends upon THE GOVERNMENT to create and, most importantly, to sustain them. They are, in short, an illustration of social policy by the government.
Why don't more people notice this?
Mind you, I am not anti-corporation. I own shares in many corporations. I was once majority-shareholder in more than one. I helped found more than one. That's not the point. The point is: the government creates and sustains these entitites, and it is at the sufference of the government (that's right, THE STATE) that they exist at all.
Indeed, if you ask anyone why corporations are a good thing, they inevitably resort to telling you why corporations are good things: how they create jobs, how they offer goods and services to benefit everyday people. But if you really ask them, especially the so-called "free marketeers," where the corporations come from, they make "uh, ur, uh, humm!" noises.
Why is that?
My answer: because they are hoist with their own petard. The undeniable reality is that corporations are a socialist, statist enterprise. To the extent that they succeed at all to offering tangible benefit to anyone, it is because the state (yes, the big bad government) makes that possible.
Indeed, to the extent that they do good at all, corporations are an example of successful government regulatory policy.
They simply are.
You don't think so? Okay: Why not?
So, no, they simply are not a socialist, statist enterprise.
From then until now, every change in the tort rules involved big bad government implementing social policy. That's one of the things government, to all but the most extreme anarchists, is empowered to do: mediate disputes when some gets hurt and assign risk and liability in some consistent fashion. If I remember correctly, even freakin' Nozick advocated as much in Anarchy, State, and Utopia.
So corporations are successful uses of power by the state? Well, that's exactly what governments are and should be empowered to do. Virtually everyone agrees on this.
Have you ever filed a corporation? The entire reason that they exist as legal persons is that the state in which you incorporated passed legislation creating a corporation for you (it used to take a separate act of the state legislature for every corporation, but within the last 100 years all of the states passed general legislation providing for a simple way to form a corporation).
But let's put this matter really simply: how on earth do you think that a legal person with no correspondence to any natural person is a creation of the free markets and not of law?
There are some curious issues raised because it's a legal person but not a natural person, but the only relevant one is that neither agents nor owners of the corporation can be personally held liable for the corporation's debts. That's the critical factor which has made corporations (and to a great degree, our economy) flourish.
But these legal persons are entirely creations of law, because they only exist in a legal sense.
It would make for a fascinating angle in fiction: A world in which corporations as a formally sanctioned state entity were never invented.
What would have happened instead to create the size of enterprises frankly needed, while providing enough of the same incentive to invest by a wide array of people?
Would the family-oriented enterprises of the Middle Eastern/Islamic mold have been the model and not been made obsolete in global competetiveness with corporations that could grow so much larger so much easier?
The same thing for marriage as an artificial creature of the state. What if states had never formally done anything for or against the concept, so there were no special benefits or automatic legal standings associated with marriage? And what if neither states nor religions had decided they had a vested interest in marriage for the procreative benefit to them of creating more followers?
Maybe it's not as unnaturally artificial, but it receives artificial legal treatment and encouragement.
Freedom of association does not a corporation make. Under the law corporations are treated as persons. Mobs don't have such standing.
Creating new options does not make anything less free. Limiting freedom is when you outlaw existing options.
Furthermore, if you are the part owner of a corporation (I am part owner of many of them myself) you are basically immune to being sued personally for whatever that corporation does--which is, again, NOT something from common law or any form of natural law philosophy, but because the state says so.
If I were a traditional sole poprietorship or member of a partnership I could be sued personallky if my business screws up somehow. But the law holds me harmless in most lawsuits against my corporation. Why? Because the state (THE GOVERNMENT!!) views this as a positive social good that encourages business.
Now as it happens I think that on the whole corporations are good things. But can we stop with the silly illusion that they are "libertarian" phenomena? They are not. They are fictional paper entities both created and sustained by THE STATE, and furthermore, to the extent that they do any good at all, this is an indication that corporations are an example of successful state regulation of business.
The funny thing is, if you go back 100 years or so, most conservatives (there were no libertarians in name back then) understood all this implicitely. Its funny how today weve forgotten all that, isn't it?
maor, you are aware, aren't you that you've just argued that state-granted monopolies, price-fixing, quotas, and subsidies are all consistent with a free market?
In other news freedom is slavery, war is peace, and lying is honesty.
My point: the concept of a corporation was a private sector idea and not a product of the state's imagination. Admittedly, the current expression of this concept is given by the legal definition of a corporation. However, that's merely a function of the present day reach of government.
Yeah it would at that. I might even write it some time. ;-) Although, a more likely scenario seems like the idea that corporations exist, but only in the sense that they did in, say, the 19th century: very rare creatures, created by various national bodies (such as the Dutch East India Corporation) for very specific purposes.
It used to be conservatives who were suspicious of corporations, and as for libertarians, Ayn Rand herself was deeply suspicious of them, arguing that they were a form of state-sanctioned collectivism. In that, she was certaintly .
I'll grant Dean's assertion that the feature of legal personage came from the state, but I find that assertion to be a truism - a construct such as a legal person can only come from the state. However, most of the features of corporations predate state involvement and corporations would exist, though in a different form, without modern day state involvement.
In sum, the state creates both the corporations and the need for them. Not that there's anything wrong with that!
Isn't it cool Dean, that a topic you brought up some time back has made me think about it at random times and form ideas on it all this time later? I thought it was funny you brought it up again just now.
For the idiots out here trying to learn, how does that happen?
Can I really sue Wal-Mart if you buy something there and then sell it to me?
Obviously there are governance and social policy implications - corporations create externalities, and consume government services like the legal system, but the other legal entities do as well (trusts, partnerships, etc)
Whether this is a socialist or statist plot, or whether or it's "natural" seems an interesting question as well. Looking at failed or totalitarian states, it seems that "natural" rights like personal life, liberty, and property rights also derive (at least partially) from the state.
Here's wondering ...
Odd as it sounds, its the need for someone to enforce contracts that proves the point about there being a need for some government. Yes, people can hire private arbitrators, but its not possible to use them for every transactional dispute.
I have a problem with the notion that guilds were the genesis of corporations. Although there is clearly a parallel there, I'm having difficulty imagining "The General Motors Guild" being an alternative to "The General Motors Corporation." Its funcitoning would be completely different. For example, if a guild member makes a faulty car that hurts or kills someone, you wouldn't sue the guild, you'd sue the craftsmen who built the car. Does that even make sense?
Nope. Whether it rankles the libertarian heart or not, the complete truth is that corporations are state-created entities, granted special powers and privileges and potections by the state, under the theory that allowing them to exist is a broad social good. They simply are not a natural, organic phenomenon.
That is the difference between a "guild" and modern corporation- joint ownership of assets and liabilities.
Well, no. Some libertarians are closet anarchists, but only a few. No libertarian I've ever had a discussion with has ever said that there should be no gov't. If a gov't is going to exist and it is going to protect individual rights, it must have a system by which it can catch (police) and prosecute (courts) violators.
Quite a few of them have been lawyers, so I doubt that contract disputes would be considered improper use of the court system.
By the way, have I mentioned that the entire concept of intellectual property is also entirely a government creation, one that could not be sutained without government? - Dean
Property rights cannot be sustained without gov't either does that make the concept of property rights a gov't creation?
Real property can be owned by more than one person. It happens all the time. Am I missing something?
Also, can someone explain in plain english what exactly you mean by natural law and common law to us non-lawyers?
To me natural law would be things like gravity.
BK
Yup. Unless of course I've altered it in some way, a products liability suit can be brought against anyone in the chain of distribution. If Wal-Mart thinks it's unfair, they can turn around and sue the wholesaler, who in turn may sue the manufacturer. Regardless of how it pans out, somebody's going to end up holding the bag, and the business ends up going bankrupt, should the stockholders lose their houses?
Another way the tort problem can arise is with parties who don't deal with the business as a business at all. If a Pizza Hut delivery guy runs you over, do you sue Pizza Hut, Inc., or do you go after the guy who owns the local Pizza Hut personally? If the latter, I sure wouldn't want to own a Pizza Hut. Would you?
The concept of personal property exists in all societies throughout history. If there is such a thing as a natural right, that's one. Everyone recognizes there is such a thing as property (except dilletante marxists, who no one takes seriously anymore except college professors).
The concept of intellectual property, however, was specifically created by the government. No such concept as copyright or patent existed, at all, until government declared that they did. They are an instrument of law, and not the "natural free market."
Only that if your property damages something or someone, all of the owners are liable for the result. Corporations were specifically created by the government -- note, again, they did not exist at all until the state declared that they existed -- specifically to make it possible for people to own something for which their personal liability was almost or completely eliminated.
Furthermore, they were created and sustained because they made it possible for a business with dozens or hundreds or even thousands of investors to participate in a business venture without constant conflict. Traditional forms of business--partnerships, family businesses--existed without the law creating them, however, these forms of business became unstable once there were too many fighting partners. Corporations were a solution to that--a government created, government-designed solution from day one.
Also, can someone explain in plain english what exactly you mean by natural law and common law to us non-lawyers?
Natural law isn't something lawyers much deal with. Within the western tradition there is a sort of pervasive belief in "natural law" that springs from God. Honestly I don't believe in it, although I do think you can say there are "natural laws" when you see the same phenomena in every civilization. For example, every civilization, even very primitive ones, recognizes property either explicitely or implicitely. Every civilization recognizes marriage. And so on.
The point is, bringing us back around to it: the concept of a corporation never existed, ever, until government created them. They only continue to exist because the government allows them to. These non-human homonculi are more than just "jointly owned property," they exist as legal entities separate from their owners, and even have rights including free speech, free press, and property rights all on their own! Where exactly outside of the corporation do you have the idea of one piece of property owning other pieces of property? Answer: you don't, because that's unnatural and has no place in any legal tradition. Only corporations can do this--and as I have stated many times, and which is utterly irrefutable, there was never such a thing as a corporation until government created the first one (most say it was the Dutch East Indies corp--which was of course a government creation).
You own yourself.
Thus the idea of natural law coming from God or religion baffles me, unless there are people talking about "natural law" and meaning something different from what other people mean when they say "natural law." That's always possible, even probable.
A lot of this is stuff I've never really given much thought to. What you're saying seems to follow fairly logically even though my gut reaction is to disagree (of course we all know how reliable gut reactions can be :-) ).
Two more questions (for now at least):
1)
The concept of personal property exists in all societies throughout history.
Agreed, but if such time passes that no one remembers (or has recorded) a time without corporations would it then become natural law and as such a natural part of the free market? This seems odd to me, that the only difference is time. Or do you consider this scenario a practical impossibility?
2)
Xrlq,
In the case of the Pizza Hut accident why wouldn't the driver be solely responsible? I understand why the person would want to sue Pizza Hut (they have the deeper pockets), but why would they be liable?
Once again, thanks guys.
BK
[In my view]
Personal property and private property are two different things; we conflate them out of tradition. My knife (because I traded for it or made it) or my food (idem.) are personal property. Private property, of which the canonical example is real property, i.e. land, is a separate thing, and is a creature of the State which originated with the original proto-state, the tribe. The leader of the tribe deputized one of his cronies or relatives to manage something, typically an area, and specified he could do so without let or hindrance provided that he (1) followed the leader's instructions when applicable and (2) contributed to the leader's well-being. Private property today, descended from that through full-blown feudalism, follows the same rules: the State will protect your use of private property provided that you obey the law and pay taxes. Personal property isn't protected in quite the same way.
As States grew larger and the duties of Government became more complex, private property grew into a sort of decentralization or hierarchy-flattening system. The King didn't want to have to micromanage plantings and harvest in every holding, so the property-owner was deputized to do that. Private holdings in turn grew larger and more complex, leading to a chain of delegations that pushed management of resources out close to where they originated. Societies which did that were, and are, much more efficient in their use of resources than those which insist upon rigid central control; they're more flexible, and decisions are made according to facts on the ground rather than rumor and third-hand information. So private property got to be the norm.
At some point the complexity of this system grew unmanageable, and corporations came into being to rectify that. A corporation is a sub-State, with all the powers and privileges of the State except the police or army (same thing, at the time corporations were invented.) It does the same thing as a feudal lord or noble does, only at ninety degrees -- instead of decisions all being made at the center, they're pushed out to where they're pertinent. Where the lord managed an area of land, the corporation manages a conceptual space that cuts across physical boundaries.
And the corporation is the same as the feudal lord in another way: it's there because the State says so. Proto-corporations came into being so that the State could tax areas it hadn't conquered. The money the corporation made in its territory came home and was taxed into the King's coffers. Modern ones still do that, of course. It's a handy way of hiding the level of taxation.
Socialist governments do the same thing. The DDR had, instead of GmbH, VEB or "people's economic association." A VEB did the same thing a capitalist corporation does, managed some aspect of the resources (including productive capacity) of the society -- a little more closely connected to the central State than, say, GM is, but recognizably the same thing in a different setting. They didn't call the concept "private property" because that's anathema to Marxist theory, but the assignment -- "You control this, so long as you obey the rules and keep the money coming in; go to it" -- was the same.
Limited liability came about when the need for capital got larger than rich people could support. The aggregate of the holdings of ordinary people is many multiples of the value held by the rich, but where a rich person could afford to roll the dice by joining a partnership it would be stupid for an ordinary worker to risk his livelihood on such a thing. Letting liability stop with the corporation and not flow to its owners allows an ordinary worker to contribute capital to accomplish something; he still risks what he contributed, but not his whole living. Workers can (and do) hold stock in corporations, thus becoming owners.
Nowadays the corporations get bigger and start going international -- Daimler-Chryser, anyone? At the same time we're starting to see glimmers of the notion that someday we may have most of the conflicts necessitating arms die out. When Marx said the State would wither away, he didn't mean no central authority would exist; he meant that there would no longer be a need for the coercive power of the State. And remember that a corporation has no (armed) coercive power of its own; the State takes care of that for it.
So what a corporation is, is an actual mechanism for realizing the Marxist End of History. The Workers will own the means of production by holding stock in the corporations, and since there will no longer be need for armies to contest between States there will be no need for taxes to support them; the state will wither away, leaving corporations to manage things.
And Donald Trump is in the Vanguard of the Triumph of Socialism. Ain't it great?
Regards,
Ric
But the State violates much of what I think of as people's inherent rights all the time, so I am sure my opinion is some far out idea.
I don't really agree with Dean on the corporation issue. His discussion assumes that legal personhood and limited liability are what fundamentally make a corporation, when there is a good argument to be made that at their base, corporations exist as a contractual framework allowing for efficient management of pooled capital.
However, I think he is more correct in his discussion of intellectual property. Even if you argue that creators of works have natural property rights in IP, it is tough to think of a way for them to protect those rights once the IP is distributed unless there are state created rights. Realizing this made me think of something: I think the government should tax intellectual property. Hear me out. I'm not talking about all intellectual property. Instead we could have a new class of copyrights, trademarks, etc, that get additional protections, particularly some of the ones the IP industrys (recording, music, software, etc) are trying to get. In exchange for registration under this regime, the government appraises each work of IP registered, then taxes a percentage of this appraisal, almost like a real property tax. There would be some minimum tax level. As long as the work was economically viable, the owner could pay the tax. If the owner could not or would not pay the tax, the work would lapse into the public domain. This would keep works that were no longer financially viable for the owner to publish from being restricted from distribution in more efficient networks because of copyrights.
I'm not sure if this an original idea, I've never seen it anywhere else, but if you've heard it before, I'd love to read more about it so point me in the direction of additional commentary.
TravisW
His employer had nothing to due with the drivers negligence. I guess it comes down to this. If you paid Joe Bob down the street to transport an old desk you sold at a yard sale and Joe hit my car while making the delivery it wouldn't even occur to me to sue you the employer(Unless you had a prior contract that would indemnify him). I don't see why scale should change anything.
As I said, this is really off-topic so I'll shut up now.
BK
In what way are "socialist" and "statist" the same? It seems to me that corporations are capitalist statist enterprises. Are we to believe that all states are socialist states? If that's the case, then the term "socialist" is redundant.
Jody pointed out that modern corporations are rooted in the historical, common-law concept of the guild. So are corporations any more or less artificial (if that's the point) than any other entity that has roots in history and is currently defined by statute?
Does law imply a state? Are you conflating "legal" with "statist"? If law does imply a state, isn't this discussion pointless?
I always thought of unions as having as much in common with guilds as anything, but perhaps I have a deficiency in my historical understanding of them. Corporations don't strike me as the same thing at all.
Heck, didn't guilds play a regulatory role now covered by government and/or industry associations and/or trade unions? You can't be a whatever if you aren't in the whatever guild, via apprenticeship and such? And now it's you can be a doctor if you haven't jumped through all the right hoops and joined the AMA, can't be a barber if you haven't been licensed, etc.
Travis, I have seen an idea like that. Might have even been at or proposed by Jerry Pournelle. Not a tax, but a fee for copyright. If you ever stopped paying the fee, it would lapse, so a book, movie, song nobody cared about or that had no clear "owner" anymore, the owner would not pay eventually and the status would be clear. It would achieve the goal of Disney to be able to keep its property for a very long time (but still finite, I would expect), while making more stuff go public domain sooner.
I forget the proposed details, but what you said reminded me of it.
Personally, I haven't decided my pov on this yet.
Hail Eris,
Ratatosk, Squirrel of Discord
Yes OT is where we are at the moment and I'll not say anymore after this comment. Legally the degree of negligence is assigned based on the duty owed the public. If the car is owned by the employer, you would be compensated by whoever insured the car; ergo the employer pays for your damaged property through its insurance carrier.
Common-law decided through many judicial precedents that the owner of property that causes damage is liable in most cases although the driver could certainly be sued also and often is when there is serious bodily injury involved. Trouble is the driver doesn't have any insurance to pay so why bother (unless he owns the car itself and is using it in carrying out job duties). I'm not talking about fender-benders but serious injuries or major property damage. You sure wouldn't have too many drivers willing to operate a semi if they alone are liable for accidents involving the owner's truck. Semi's have been known to derail trains and can cause huge dollar amount of damage.
Tort law is complicated but when you do study the principles involved, they are quite fair and sensible.
In any case, they are a state creation, allowed to exist and granted special legal powers and immunities that the state deems a positive social good. It also happens -- and no one denies this -- that when they reach certain scales, they squeeze out small business and entrepreneurs. Now, it may be that on the whole it is good that they do that, and that the best role for small businesses and such is to constantly be seeking new areas where the big corporations haven't taken hold yet, I don't know. I think the larger point is, it is hazardous to continually act as if corporations are purely and simply a market phenomenon: they simply are not.
There was a time when all conservatives and most libertarians (certainly Ayn Rand and her followers) understood and agreed with all of this implicitely, and were deeply suspicious of corporations, most especially large ones. That seems to have flown out the window in the last generation or so and I'm not at all sure why. Somehow the notion has become that "suspicion of big business = left-wing" and there is no reason to view it that way.
"maor, you are aware, aren't you that you've just argued that state-granted monopolies, price-fixing, quotas, and subsidies are all consistent with a free market?"
You're mistaken. I said that reduction of freedom is a limiting of options.
state-granted monopolies, quotas and price-fixing are examples of the state limiting traders' options as to what can be sold, how much, and at what price.
(I don't think anything I said has to do with subsidies)
Corporations are simply a decision by the state that in certain cases, you are doing business with a thing, not a person. You're still doing business. And nobody HAS to incorporate.
(Perhaps you misunderstood my statement about laws being part of a free market. I said "in general". Obviously, some laws are not compatible with a free market, but Dean seems to be implying that the very fact that a law is new and revolutionary makes anti-free market.)
"The undeniable reality is that corporations are a socialist, statist enterprise. To the extent that they succeed at all to offering tangible benefit to anyone, it is because the state (yes, the big bad government) makes that possible."
.........
"Indeed, to the extent that they do good at all, corporations are an example of successful government regulatory policy."
They're really just a new form of partnership.
Before a corporation, investors would be responsible for their partnership's debts. Hence, it was quite risky to invest.
The corporation was dreamed up as a way to make investing safer. Hence, investment capital poured into markets and our economies took off. I realize it is a relatively new idea (I've played that civilization video game).
Anyway, that’s the basic facts. Contrasted with your assertions, yours seem quite a stretch.
State socialism? Regulatory policy?
If anything the corporation was an invention that helped progress society... just like inventing the concept of the Zero helped mathematics...
If you cannot admit this basic, undeniable fact, all you're doing is clapping your hands over your ears and yelling "lalalala, I can't hear you!"
So is every other kind of law.
Is there something about corporations that's inherently bad? Is there something about law that's inherently bad? Does libertarianism mean we have to live in anarchy, where the weak are condemned to be victims of the strong?
In other words, is there a point here?
1) There exists a strain of libertarian thought, as well as some conservative thought, which holds that any regulation or government infringement on how corporations are organized or do business is some sort of evil interference in the free market. Bollux. Corporations themselves ARE an interference by the state into the free market.
2) Most of the privileges we give to corporations are there because we the voters have decided to give them to them, not because of some inherent natural or other rights they have.
I also note again that, if this were 50 years ago, every conservative would have nodded his head and said "of course" to all of that. So, for that matter, would Ayn Rand.
These days it's just interesting how many people seem to instantly reject that thinking and go immediately to blathering about how if you've got a problem with the way corporate America behaves, if you wish to discuss how they'll be expected to treat customers or employees, it is indicative of some sort of "slippery slope" thinking toward outright socialism or a rejection of capitalism.
Much of what I'm saying here is I think self-evident to most people. The bigger a corporation gets, the more scrutiny it deserves from government--since it was government that made it possible for that big corporation to exist in the first place. Corporations as they exist today simply are not a natural or organic free market phenomenon. It strikes me as entirely fair to note this when discussing intelligent public policy in terms of how we treat big business--not as enemies, but certainly not as something sacrosanct either.
I don't think the Free Market is really free, nor that it should be. Concentrations of economic power are dangerous, and it's vital that they be regulated by the state. But the things that make a corporation a corporation don't uniquely relate to its degree of economic power or its degree of danger to the rest of us.
A single very rich individual (George Soros comes to mind) is just as dangerours as a rich corporation, which is a sort of abstract person. They have the ability to harm large numbers of people, so they have to be regulated in the interst of the greatest good for the greatest number.
So the things that relate to corporate structure as a legal creation aren't the things about corporations that trouble me.
...thus marking you, my friend, as a conservative. Or perhaps even a liberal. Depending on your frame of reference. But certainly no ideologue.
I knew there was something I liked about you, you crusty old curmudgeon. Wrong as you are about so many other things. ;-)
At the end of the day, we are the government, and it's only as good or as bad as we want it to be.