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i’ve heard stephan molyneux and i believe roderick long say that corporations arent compatible with a free market because they are state granted privileges. can anyone point me any literature that refutes this premise?
Well, it seems to be a semantic issue. What they excactly mean by corporations? How a corporation differ from a big company?
I think it’s best to say that corporations would have to be different in a libertarian order, but of course something similar could exist.
Read my post here.
There was a speech by Peter Klein at MU2010 called “The Corporation And The Free Market”. If I remember correctly, he explains that corporations and Limited Liability arose from Common Law (although I might be wrong on that, I haven’t listened to the speech since last year):
http://mises.org/media/5251/The-Corporation-and-the-Free-Market
The organizational structure is the same as a democratic state. Board of directors = parliament. Shareholders = citizens.
Funny, that’s a really bad analogy that Hessen specifically dislikes. The organizational structure is, in fact, nothing like a democratic state because it has profit/loss and private equity. There is not even a trivial resemblence, because the way actual boards and shareholder voting rights work have no resemblence to suffrage and parliament.
Some critics equate large corporations with government institutions and then find them woefully deficient in living up to democratic norms (voting rights are based on number of shares owned rather than one vote per person, for example). Thus shareholders are renamed “citizens,” the board of directors is “the legislature,” and the officers are “the executive branch.” They call the articles of incorporation a “constitution,” the bylaws “private statutes,” and merger agreements “treaties.”
But the analogy, however ingenious, is defective. It cannot encompass all the major groups within the corporation. If shareholders are called citizens or voters, what are other suppliers of capital called? Are bondholders “resident aliens” because they cannot vote? And are those who buy convertible debentures “citizens in training” until they acquire voting rights? A belabored analogy cannot justify equating business and government.
Millions of people freely choose to invest their savings in the shares of publicly traded corporations. It is far-fetched to believe that shareholders are being victimized—denied the control over corporate affairs that they expected to exercise, or being shortchanged on dividends—and yet still retain their shares and buy new shares or bid up the price of existing shares. If shareholders were victims, corporations could not possibly raise additional capital through new stock offerings. Yet they do so frequently.
I wouldn’t call bondholders “within” a corporation. As far as I know, you can freely trade citizenship.
Corporations as we know it today, would not exist in a free market. The corporate entity is a state designated privelege, with its perks:
The more accurate term when refering to a “corporation” sans the legal saction would be a firm. Firms would most definately exist in a free market.
Corporate personhood is weird and unecessary, but it is hardly a ‘privilege’ and has nothing to do with the corporate form which long predates the Anglo-American interpolation of that onto corporations. Corporations are in fact a network of contracts, and that is how they operate, and all this ‘corporate personhood’ stuff is irrelevant except as an artifact of common law.
Hessen also addresses this corporate personhood nonsense in his book. All I’ve heard so far are pat criticisms which he utterly smashes; with ease, I might add. From a website paraphrasing Hessen’s view:
Very briefly and only suggestively, a corporation is an association among people whereby they invest for a common purpose, usually but not exclusively economic. Corporations are not unlike orchestras, teams, clubs, churches, universities, and other human associations organized for achieving some purpose shared by the members or supporters. The issue of their supposed “personhood” arises mostly in connection with how the government treats them for tax purposes and since libertarians are opposed to coercion and, thus, taxation, this issue is largely moot for them.
In fact, in many ways, it is worse for them to be treated as a ‘person’ since this is one of the things that allows triple taxation on corporate income. If you consider that a ‘privelege’ then you live in a different Universe than I do.
“Corporate personhood is weird and unecessary, but it is hardly a ‘privilege’ and has nothing to do with the corporate form which long predates the Anglo-American interpolation of that onto corporations.”
I agree, that corporate personhood is weird and unnecessary. Goodness knows I am not for 3x taxation. Perhaps the term “privilege” did not denote what I had intended, the benefits and/or drawbacks upon a given corporation and the marketplace of having the legal saction of “personhood.”
It is distortive, but not too much, I think. It’s mainly a tax issue. I think the biggest distortion on corporations is much to their disadvantage; and that is how the regulations that are mainly only applied to large corporations which cause them to distort a lot of their internal operations to fit bureaucratic monkey business. Without that the majority of their employees and operations would actually be geared towards making money, instead of pleasing Algore.