In a very interesting article, Gene DeNardo discusses a viewpoint that I believe should get way more attention in the libertarian world: whether or not corporations should be considered part of the free market. I know through a class I took on corporate law that a corporation is purely an invention of the state and owes all of its success to the government which protects its investors from the liability normally associated with similar investment ventures.
The main draw to investing in a corporation is the limited liability one receives for choosing the corporate form of investment over investing in, say, a general partnership. However, where does this limited liability come from, and who pays the price when the consequences of ones actions are not allowed to be divvied out? It is the opinion of DeNardo that society bears the cost. Therefore, in order to protect certain investors, the costs those investors would normally be held responsible for are distributed onto all of us:
Basically, when a corporation exceeds its liability in any way, when it extends itself beyond its value, the cost is socialized. It matters not whether the creditors take a bath or the government steps in, someone besides those within the corporation must make up the difference. This forced market condition in and of itself, is blantant socialism.
Thoughts?
its completely true. corporations are a figment of the capitalist imagination. they can't exist without state intervention. kevin carson has some great work on this area.
His arguement is one I have been making for awhile now, we need to retailor limited liability. I've always had a moral problem with an investor having basically no ties to the corporation they are investing in and sharing none of the problems. For example, I could invest in CACI, a defense contractor. CACI has been implicated in the torture of G-Bay detainees. Yet as an investor, despite my morals, they keep getting gov't contracts and have exponential growth. So I see this as a gain to me, despite the action of the corporation. Perhaps if I were liable for some of the conduct of the company then i would be a less inclined to invest in those that carry on in shady practices.We would see the end of say Halliburton, Blackwater, Dyncorp, and perhaps many other corporations who have been dealing in the shadows for years.
Yes! I'm not the only one!!
Corporations should not exist. The Founders were very wary of corporations. Originally the government only granted a charter of 40 years to be a corporation. Corporatism only leads to monopolies and political takeovers.
Modern corporations are Alexander Hamilton's dream come true. You have to wonder why corporations hardly ever endorse libertarianism if they are a natural outgrowth of the market. It would seem that they know exactly what they are.
Check out this: http://en.wikipedia.org/wiki/Limited_liability. It has a good quote from Rothbard.
In addition to this socialization of liabilities by corporations, Paul Graham points out how corporations also internally behave like communist states, given they don't pay employees based on the revenue they generate:
http://www.paulgraham.com/wealth.html
This is probably why he started his own company, and the same reason many libertarians do the same.
Wait, they don't pay employees based on the revenue they generate, and this is wrong? What principle could you possibly be applying here? Hmm....
I agree with Rothbard that corporations do contract freely and in the free market, potential stockholders would simply negotiate with the creditors and express that their loss is limited to their investment. The creditor would take on the risk accordingly. In that aspect, corporations are of the free market.
However, this is much different than what we have today seeing as how investors are not liable for personal injuries inflicted by corporations, nor are they liable for environmental destruction carried out by the corporation. Now granted, some actions by the corporation shouldn't hold investors liable, but this could be disputed by arbitration agencies based on a principal/agent relationship and who should be held liable. Courts are not needed in a free market either.
In a truly free market, corporations would not want to hurt the environment because this would in turn damage others property, which would in turn hold investors liable. Therefore, investors would want to make sure the corporation did not infringe on others rights. Isn't the free market golden!
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