The modern corporation is a legal entity chartered by the State. Corporations benefit from an arsenal of privileges, such as personhood and limited liability, which serve to set the rules of the market on terms favorable to corporate investors and managers. The trend has always been to correct any perceived problems with big business by large, top-down regulation, rather than to reexamine the quite blatant decisions made long ago about how to treat these entities.
For instance, it is conceivable that a firm could argue effectively in front of a judge for certain of the rights of being a human citizen on a case by case basis, but current established law mandates a clumsy legal equivalence between living human beings and abstract organizations of people and assets (which is historically dubious). The benefit to big business, of course, is to regularize and simply business legal proceedings, setting aside the legal advantages this gives corporations over individual humans. The ability to exercise first and fourth amendment rights as if the firm were a human being results in corporate campaign contributions and protection from random inspections, for instance – very different from the way those rights were intended to be invoked by the founders.
Obviously, limited liability is a fiat subsidy to corporate investors, the value of which is vast when one calculates the total capitalized value of the stock market, for instance. But the utility of the subsidy goes even further, because it allows investors to hire managers who have a legal mandate to pursue profits while maintaining a distance from the way profits are pursued. Highly capitalized firms, who by their sheer size wield far more potential for harm than any single individual, essentially obfuscate the way decisions are made so that if third parties to the stockholder-manager relationship are harmed, stockholders cannot lose more than their investment.
The imbalance of responsibility this enables cannot be underestimated, for it goes to the very heart of corporate economic behavior. What would be different about business, socioeconomics, and politics if stockholders knew that their managers’ activities would leave them fully liable for the actions of the corporation and could lose their savings, their car, their house? Limited liability and corporate personhood make possible a way of doing business in a far riskier way than normal people would.
In a free market, corporations would not be able to rely on the State for their very existence. Any ability they’d have to do business as an entity would come from the consent and cooperation of the market – customers, suppliers, contractors, service providers, banks, but most importantly management. Without an SEC and intrusive reporting requirements, oversight, and regulatory enforcement, it would be very hard to prevent the larger and more complex firms from being subjected to outright fraud in a variety of ways. The legal relationships that govern so much capital finance and business activity would become much more ad hoc and less predictable. Risk would skyrocket, which is a much more favorable environment for the small-time entrepreneur than the big, clumsy, bureaucratic corporation.
—Jeremy Weiland
Chinese Company Wants To Build Self-Sustaining City South of Boise?
Well, that’s great.
The problem I see with this is not that some “Communist” State-owned Corporation is building and/or owning property in the U.S. so much as some Corporation will be granted privileges and loans from the State of Idaho in its operation.
Also, regardless of whether or not “land” is being “purchased” by a foreign nation, the “land” will still be rented from the State and U.S. Government through the payment of Property Taxes. You cannot “own” land; it is rented.
As I am an advocate of Free Markets, I am an advocate of open borders; any individual or group of individuals has a Natural Right to trade or gift Property to any individual or group of individuals. With that in mind, an organization has the Right to build any kind of infrastructure it pleases so long as it doesn’t infringe on the Natural Rights of others.
Another thing that has some up in arms is that this “Self-Sustaining City” will not be subject to the laws of the State of Idaho … the Positive Laws. It will be able to create its own laws within the jurisdiction of the “land” it “owns.” As can a private individual create the laws of his or her property, the Corporation can create the laws of its property.
A problem I see is that the Positive Laws created and enforced within its jurisdiction will be at odds with Natural Laws. I don’t have a problem with the creations of the Corporation being controlled how the Corporation sees fit. But I do have a problem with the non-creations, the arbitrary borders creating jurisdiction of control for lands, allowing Positive Law to trample Natural Law.
The problem I have with the situation is the same problem I have with the State, any private real estate and any unfounded aggression.
With that in mind I’ll pointblankly state that I have no problem with a Communist City existing anywhere so long as that community is observant of Natural Law … which I don’t think this one will be—but then again, neither has Idaho been historically.
Hayek On Regulation
The Crown Prince of the Austrian School of Economics elaborates on Regulation vs. Free Markets:
Nor can certain harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism. But the fact that we have to resort to the substitution of direct regulation by authority where the conditions for the proper working of competition cannot be created, does not prove that we should suppress competition where it can be made to function.
Make sure you completely analyze the entire quote: Hayek is saying that, wherever possible, price mechanisms and competition are preferable to directly regulating human activity. But he is also saying that there WILL be instances where the free market simply is incapable of preventing the harmful effects of certain modes of production and human activity, and that regulation of those modes of production and activities is therefore warranted.
This is something that I think most Liberals would agree with: Liberals and Progressives don’t care if Ipads are affordable or not. They don’t believe the government should be in charge of making movie tickets less expensive, or regulating the size of basketballs. We quite frankly just don’t care about that stuff. At least I don’t.
What we are most concerned about are quality of life issues with regard to basic needs. One thing that has a huge effect on EVERYBODY’S quality of life is the environment. And it stands to reason that the environmental harm caused by industrial practices will not be curtailed without legal compulsion, because it’s simply more profitable.
For example: In the absence of a law proscribing the dumping of toxic waste into rivers, everybody’s going to do it. Not even necessarily because it’s cheaper per se. But because those who don’t will not be able to compete with businesses who ARE dumping toxic waste into rivers, since their operating costs are lower. But if government proscribes dumping toxic waste into rivers across the board, then all businesses are on a level playing field. The financial incentive to pollute no longer outweighs the incentive not to.
See I don’t think “regulation” is what prevents dumping toxic waste into rivers, or polluting the air. I think that those are infringes on peoples’ rights if they harm people directly. If a corporation dumps toxic waste into rivers and someone drinks from that river, that the corporation does not own, then that corporation has harmed the person’s life. If they pollute the air and harm an individual by that, then they similarly should be prosecuted for infringing on one’s rights.
It was very nice to read what you say about regulations determining the size of basket balls and everything else, that don’t negatively affect someone else. I just tend to believe regulations that are there to protect life, liberty and property, are unnecessary since when one infringes on the life, liberty and/or property of someone else, they have committed a crime against the person, whether a regulation is in place or not.
Also, who is to determine what standard these regulations are to be at? Is it the corporations who select their puppet office-holder, run his election through their funding, have worked with him in the past, know he’s on “their” side? Likely, that will be the case. Then, the new corporate puppet public official will create regulation that assists in the growth of his buddies at the expense of other businesses. He’ll put regulations in place that are somewhat effective yet expensive to maintain to bar entry into the industry; rather than simply regulations that are cost-efficient and effective in reducing risk. If he put the latter regulations, his corporate buddies wouldn’t be too stoked about his job and likely next time around, they’ll donate their funds to someone that’s more likely to assist their business growth. Also, these regulations give the illusion that simply by following regulations you aren’t harming the life, liberty and/or property of someone else. Simply following regulations should not allow individuals/corporations off the hook for violating human rights, even though currently it does—and forever it gives the illusion that by following regulations they’re doing “the right thing.”
