I have long been known as a dedicated, unrelenting foe of Communism, and of the dysfunctional philosophy that underlies it known as Marxism.
If you’re looking for me to say “but” right about here, just stop. There is no “but.”
I feel almost stupid having to write the above sentences. Honestly, it’s almost humiliating to have to write them. Search my archives. I’m not even a little nice on this subject. I don’t even have much truck with those who say “Marxism and Communism aren’t the same thing.” Nice try. In the real world it’s almost invariably a distinction without a difference.
I’ll make some excuses for useful idiots and youthful idealists. But only so many. I make similar forgiveness of white supremacists or “black power” extremists or whatnot; basically, I sympathize with those who in fear and ignorance made youthful mistakes; this is why I think that American History X was one of the greatest films of the 1990s, and should be required watching. Not with your young children, but certainly with your older children. Not because it’s an exercise in self-flagellation (it is not) but because it’s an eye-opener that will leave neither the left nor the right nor members of any faith tradition or culture entirely comfortable.
Maybe the problem here is the Manichean worldview that still infects a lot of discussions: you’re either X or Y, you’re either black or white, you’re either liberal or conservative, you’re either left or right, you’re either pro-market or anti-market, etc.
For example, I have always been so utterly against Islamo-fascist ideology that I can’t express it. I don’t find the term “Islamo-Fascist” wrong at all; I use it to distinguish the utter nutjobs from the sane people. Most of the sane people I know agree with me on that point. It is a stain that should be viewed much like the evil that infected some (not all, just some) Christian thinking in the past–and not always as far back in the past as we would like to imagine.
It’s also not an attempt to draw a “moral equivalency” by the way–try as some might to shoehorn me into that nonsense.
I guess I write all this only because I get tired of hearing these days from people who think I have “changed.” I suppose I have a little–if you’ve aged 5 years and you haven’t changed at all, there’s probably something wrong with you–but my “change” is a bit less dramatic than some seem to think.
I say all this by way of explaining: I feel that market-oriented libertarianism and conservatism are not evil, but in need of challenging forthrightly. You know, just because they proved themselves right about many issues–the overreaching of state power, of the limited value of populism and state regulation, and the limited value of state planning–that does not make them inherently right about everything.
So in this friendly, genuinely non-hostile and Socratic (I hope) spirit, I offer two simple questions:
1) Can you find for me, anywhere in history, the existence of any such thing as a “corporation” before Stora Kopparberg was granted a charter by the King of Sweden in 1347, and can you find me more than a dozen examples of such corporations that existed before His Majesty granted said charter? Indeed, can you provide me with examples of at least two dozen such corporations that existed in the entirety of history before the 18th century? Please be specific. Partnerships and family-owned businesses do not apply.
2) Although neither Ayn Rand nor Adam Smith were perfect or infallible philosophers, I think most would agree that they are the best expositors of the idea of the free market and the entrepreneur. So, can you find me any example of a vigorous defense of the idea of the Corporation in the entire writings of either Adam Smith or Ayn Rand?
Since I’m pretty sure that the answers are “no” and “no,” I now ask sub-question 2a: Who was Howard Roark’s primary nemesis in The Fountainhead? It wasn’t the government, was it?
I am astounded by how many so-called “libertarians” and “conservatives” talk as if the Corporation is the ultimate expression of the natural and organic free market, the great expression of individual triumph–as opposed to being exactly what it is: a creation of and an ongoing expression of state power, and an exercise in collectivism.
By the way, Sam Walton has been dead for 15 years. So why is Wal-Mart an expression of the individual entrepreneur again?
Compare this to marriage, which existed long before the government defined it, and has existed for tens of thousands of years, under every culture and religion, whether the state recognized it or not. You really think they’re comparable? How so? Where do you find an example in history of such a beastie as a corporation prior to 14th century Europe, and where do you find more than a dozen of them worldwide before 19th and 20th century governments expanded the concept for trade and other purposes?
I think these are important questions that don’t get asked often enough. Indeed, I’m pretty sure these questions are going to define the political debate for the next generation.
To put it in short: you guys won on a very major and important question. Marx was wrong in most of his particulars. You won, the Marxists lost. Granted. So the argument stops there?
{ 23 comments }
Corporations are a technology intended to accomplish a social good. I can think of dozens of such technologies easily. They’re neither good nor bad. They’re like monkey wrenches or screwdrivers not laws of nature.
The charters for corporations were initially granted to the privilaged or politically connected. In the 19th century in the US, Democrats (with a capital D) argued for corporations being available to anyone, regardless of privilage. Today, anyone can create a corporation with a little paperwork and a small fee.
While you can argue that corporations are not a free market creation, their limited liability aspect has increased risk taking with all sorts of resultant advances. My problem with corporations is when they move beyond this limited scope and become “partners” with government. They accept (and sometimes encourage) government regulation in exchange for government protection.
That’s the definition of a corporation. It’s not an abuse.
Dean,
I fall right into the category of market oriented (small ‘l’) libertarian you are thinking of, but I’ve never really understood this reference you’ve made now and again. Or at least I don’t get where you are going with it…. there were no corporations before a certain time period, so what?
How does that invalidate the belief that I hold that market based institutions are generally more efficient and fair when it comes to allocating a limited amount of resources to a society with near unlimited wants?
Dean, honestly, I still don’t know who you’re arguing with against corporations. Does anyone actually disagree that corporations are state sanctioned entities? That seems to be the point your making, that someone is arguing that side.
I certainly wouldn’t argue it. Of course they’re state-sanctioned. As Dave Schuler said, they’re a tool put in place by the government to encourage investment and capital accretion. As such, they don’t, in my mind, stand for any sort of moral or ethical bent one way or the other on their own. Their propensities are entirely driven by the stewards of the individual corporations.
Now, I think you could make the case that their limited liability status allows, if not exactly encourages, those people who might act amorally or unethically a refuge in which to commit those acts without as much personal risk. And that’s a continuing calculus for the society: are the benefits of this state protection to the society worth the harm that these entities individually and collectively can do to the society, and what can be done in response.
I agree with Mal that frequently the act of incorporation is less of a danger than the rent-seeking and anti-competitive actions of corporations with respect to government. But I think that could be remedied by removing power from the government to enact such regulation, rather than reducing corporations.
Thanks, Paul. I don’t get it, either. I think most people that would argue in favor of corporations would say the value they present to society, as listed in the previous posts, outweighs the risks for abuse or whatever the downside is. I don’t believe anyone is arguing that they are inherently good and therefore beyond reproach, which seems to be the strawman that Dean has constructed.
I’d like to know where in the growth of an individual’s entreprenurial venture that it becomes dangerous or evil. What is so much worse about a corporation with a board of directors, president, CEO, and a few thousand employees compared to one person with a store and 5 employees that grows to 10 stores and 50 employees and eventually to 5000 stores and 20,000 employees, a company headquarters, public stockholders, and a board of directors, etc. Why was Walmart so much better when run by Sam Walton just because he invented it, than someone else ? Unless Walton somehow had control of the company and a higher moral and ethical fiber as compared to his successor, then as Dean says, it is a difference without a distinction.
I disagree since I can go out and create a corporation this week, and it does not mean that I get government regulation in exchange for government protection next week. All I have is the limited liability. It takes political influence in order to get what I consider to be the abuses.
From my small “l” libertarian perspective, it is the corrupting power of political influence that causes the abuses. The abuse of political influence results from either the explicit policy of the leaders of the corporation or from a need to defend against politically motivated attacks. In both cases, it is someone using political means to get what they want rather than the free market.
Dan, exactly what I was trying getting at only more articulate. Thanks.
Yes. Money flows from corporations to politicians only because politicians have something to sell – regulation.
I don’t know why you don’t get it. Dean’s point to libertarians is not to argue whether or not “market based institutions are generally more efficient and fair when it comes to allocating a limited amount of resources to a society with near unlimited wants” but that corporations are not, strictly speaking, market based institutions, and are not entitled to the deference libertarians extend to them as if they were.
Here’s some interesting history: At Tolouse (on the Garonne River) there were extensive water-powered milling facilities, with heavy capital investment in dams, etc, by 1177. Ownership of the mills was through joint-stock companies, which even had annual meetings. My source does not specify whether these companies had royal charters or not.
Source: “Stronger Than a Hundred Men: A History of the Vertical Water Wheel,” by Terry S Reynolds.
Well, as a libertarian, I’ve never been a corporation fetishist. They are a creation of the state, not a natural function of the market, so therefore I have no problem with heavy regulation on them. They are a golem that must be controlled. I don’t see them as inherently good or bad. Walmart, for example, is one of the ones that I see as a good corporation. They make a lot of goods affordable for the less wealty and generally raise the quality of life wherever they show up.
Limited liability is protection by the government. And the extra reporting and record keeping that you’re required to do is extra regulation. So, yes indeed, when you incorporate you have extra regulation and extra protection.
Within the context of the rule of law, the limited liability and the extra reporting and record keeping is transparent, objective, and the same for every corporation (variations due to state law). The regulation and protection racket I referred to in a previous post is of a different kind. It is arbitrary and discriminatory; it takes sides among competitors in the free market; it seeks to evade responsibility for wrong-doing…it is the antithesis of the rule of law.
Do you include in your definition all business organizations, or solely corporations?
–|PW|–
By the way, Sam Walton has been dead for 15 years. So why is Wal-Mart an expression of the individual entrepreneur again?
That’s not a bug. That’s a feature. The institutions and processes Walton set up are still producing profits for his investors, wages for his employees and vendors, and cheap and convenient products for his customers, 15 years after he’s dead.
Compare this to marriage, which existed long before the government defined it, and has existed for tens of thousands of years, under every culture and religions, whether the state recognized it or not. You really think they’re comparable? How so?
Now that you bring it up, yes. Historically, marriage has been used extensively to combine investements from two families into a single economic unit which has be ability to live forever through heirs. Marriage fulfilled a similar role to corporations and partnerships before the legal institutions supported corporations and partnerships.
But that’s a digression. That wasn’t what you were asking, and family partnerships don’t suffer from most of the problems you have with corporations.
Ron,
Oh, OK. I guess I just don’t read or hear from those libertarians as much as yourself and Dean. So this is really a challenge for those libertarians/pro market folks that romanticize corporations as the symbol of all markets that are free! I will exit the thread.
What we call the free market is not itself a product of the free market. It is dependent upon the rule of law: the judiciary, the police, and ultimately the military…government creations. Due to this fact, a libertarian can accept that corporations are government-created and at the same time defend them as free market actors. It is the anarchist who is not able to do this.
This is by no means a defense of the status quo or an argument that corporations should be given all sorts of deference. My argument is that corporate abuse is the result of political power not from the existence of the corporation itself. What is most interesting about this discussion is how it relates to the debates between Hamilton and Jefferson during Washington’s administration…
I don’t really see the libertarians I interact with (granted, a small minority here and at reason.com) who naturally defer to corporations. It’s usually just a preference for corporations, which DO tend to act in the market, over the government, which usually removes a market for a thing it gets involved in.
I would also say that the use of incorporation to protect assets IS a market reaction, as businesses will tend to find the best way to operate, and at this point in time, that is with these protections the government has put in place for businesses. But as for people saying ‘corporations are inherently right’… well, I don’t see people saying that (maybe I’m not looking). If corporations didn’t exist, businesses would use another way to limit their liabilities as much as possible while gaining as much profit as possible.
The problem most people have with the corporate form relate to scale as an organizing principle. During the industrial era, the thing to do was to become very large (business firms, polities, armies, labor organizations, etc.). Before the industrial era, scale was _not_ an advantage because it was not an efficient way to use available capital (meaning resources of all types: financial, physical, human).
Scale has consequences, among which are low variable unit costs of production, the ability to amass large quantities of capital, a certain remoteness from the customer, and a tendency to “dehumanize,” if you’ll permit a loaded term. The ideal term would express the idea that as the number of people increase in an organization of any kind, each individual member tends to become less important to the functioning of the organization.
If scale ceases to be an advantageous organizing principle, a lot of these things will change on their own. Why? Even where capital is abundant, it is not unlimited, so why employ it in a less than optimally efficient manner?
If you buy into the arguments of folks like Davidson and Rees-Mogg (The Sovereign Individual and other titles), the collapse of scale as an organizing principle is already beginning to happen. There’s no iron law that says scale is always and only the best way to employ capital.
I have tried on a couple of occasions to read E.F. Schumacher’s Small Is Beautiful: Capitalism As If People Mattered (Economics In One Lesson by Henry Hazlitt is much more to my taste). Tried and failed: Schumacher doesn’t strike me as particularly capitalist in outlook, but perhaps I haven’t given him enough of a chance.
The notion of excessive deference to corporations approaches the straw-man level of argument, frankly. I am no particular defender of the inherent virtue of corporations, but there is ample evidence that government intervention makes things worse instead of better. For example, government regulations are often used by large firms as entry barriers against smaller competitors. It’s not that the large firms love to be regulated, but they can better afford the fixed costs of regulatory compliance (compliance costs are largely fixed costs) than smaller firms.
Maybe instead of reading The Wealth of Nations, we should read A Theory of Moral Sentiments (or at least read it first). :-)
I’m not exactly sure what you mean by the term corporation in your inquiry.
If you mean that liability for loans taken out by the entity are limited to the assets of that entity,The Talmudic principle of “any condition regarding matters of money is valid” would cover it, provided that the credit was issued under that tacit understanding.
If you mean that financial liability for misdeed committed by people acting under the auspices of the entity is limited to the assets of that entity, I know neither of legal precedent nor logical basis.
It’s noteworthy, however, that financial liability for misdeeds committed by people under the auspices of the entity bypassing the responsible humans to be shouldered by the assets of the entity is similarly lacking for basis.So it works both ways.
Furthermore, it is critical to bear in mind that, currently, financial compensation for misdeed also has no logical basis.
I think that the criticism Dean is trying to make here, that sometimes libertarians ignore corporatism (typically aided and abetted by state actions) in their obsessive focus on statism. That is a valid critism.
Unfornutely, the historical ‘age’ of the corporation has nothing to do with this. The corporation, as has been pointed out, is a technology just as much as the computer is. It is something we have learned how to do.
The free market economy is not a ‘state of nature’ thing, although its progress is ‘natural’ in that certain natural laws seem to apply to it. It is complexity arising from lesser complexity, much like the evolutionary process.
Calling the corporation an exercise is collectivism is going a bridge too far. Certainly both corporations and individuals can at times support collectivism for their own benefits, but that doesn’t make corporations an inherently collectivist creation.
Well the paternalist soft-right in the UK &in Europe is very corporatist in outlook. In fact you could argue the EU is a corporatist entity using the state to heavily regulate corporations who in turn control the behaviour of their employees. They would prefer people to work for large corporations rather than in small business that is harder to control.
Libertarians should be as weary of corporatists as statists.
Maybe I’m just reading too much into it, Dean… but when you repeat this argument about Corporations (an argument that seems to have no purpose beyond stating itself, at that)… you often state, accurately, that corporations per se are inherently amoral. What you do not emphasize is that amoral is not the same as immoral, and the implication in your phrasing is that you intend the reader to drift from amoral TO immoral in their viewpoint.
And it raises my hackles simply because of the rather silly and irrational hatred people tend to build up when they start referencing “Big Oil” or “Big Pharma” as if there is an ongoing, intentional, sinister conspiracy among the corporations of a particular field.
A government agency is, by its nature, inefficient. It is also sometimes the least inefficient way to do something for the average citizen. A corporation is not inherently good. It is also sometimes the least bad way to provide more useful goods to the consumer than were previously available. Both are, when there is anything left over from their primary function, intent on finding ways to self-perpetuate and make sure they are never ‘not needed’. It’s the nature of, not only corporations and governments, but humans.
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