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Source link: http://archive.mises.org/8924/long-on-the-corporation/

Long on the Corporation

November 10, 2008 by

The current issue of Cato Unbound features Roderick Long’s critique of “Conflationism,” defined as the “pervasive conflation of corporatist plutocracy with libertarian laissez-faire.” As Roderick rightly points out, in the mixed economy large corporations are among the prime beneficiaries of government largess, such that a wholesale defense of “big business” is silly and counterproductive for libertarians. However, Roderick spoils (for me, anyway) an otherwise excellent summary by jumping to the unwarranted conclusion that today’s corporations are, on average, larger, more hierarchical, and more diffusely owned than the firms that would emerge under laissez faire:

In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned); prices would be lower and wages higher; and corporate power would be in shambles.

As I’ve pointed out many times (1, 2, 3) to Roderick and to Kevin Carson, from whom Roderick draws much of his analysis on this point, this is a purely speculative counterfactual, and an unconvincing one at that. Roderick and Kevin do a fine job documenting a slew of government policies that favor large, complex, vertically integrated firms: direct subsidies, of course, but also indirect benefits from intellectual property law, bootlegger-and-baptist-style restrictions on market entry, transportation subsidies, various aspects of the tax code, etc. From this they conclude that smaller, more “egalitarian” enterprises, such as worker-owned cooperatives, would tend to flourish under the free market.

The problem is that their argument cuts both ways. Certainly large firms benefit from the state. But so do small firms. Corporations are under stricter antitrust and regulatory scrutiny, are more likely to be the victims of political rent extraction (in Fred McChesney’s sense), and are subject to stricter disclosure requirements (SOX being only the most visible, recent example) than their smaller competitors. Small firms benefit from state-funded incubators, SBIR awards, regional development grants, and a host of other interventions designed to foster “entrepreneurship.” Trade barriers, war, state control of education, and a host of other interventions retard the international division of labor, reduce stocks of human capital, and lower the marginal product of labor, all of which reduce the scale and scope economies that favor large-scale production.

Which set of effects outweighs the other? It is impossible to say, ex ante. The firm on the purely free market could be larger, more vertically integrated, and more hierarchical than the typical corporation under the mixed economy. Moreover, the worker-owned cooperative, the partnership and proprietorship, the decentralized “open-production” system, all suffer from serious incentive, information, and governance problems, almost none of which are mentioned in the anti-corporation libertarian literature. I suspect this literature’s preference for small-scale production is based primarily on aesthetic, rather than scientific, grounds.

{ 59 comments }

Vince Daliessio November 10, 2008 at 2:19 pm

Most small businesses don’t benefit significantly from government largesse. All large businesses benefit from government largesse. Perhaps on a level playing field, large firms would still doninate overwhelmingly, but, again, we are speculating on a hypothetical counterfactual. I think we would have more large localized or regional firms unless the states stopped faviring vested interests too.

Niccolo November 10, 2008 at 2:52 pm

Your account of anti-trust being an indication that “smaller firms wield power” is not really a convincing one.

It seems that anti-trust laws are purely political and random accounts, as anti-trust isn’t largely used. Think about the largest firms in the world these days and then consider the lack of anti-trust that goes along in prosecuting them. The other examples are marginally beneficial to some medium level size corporations, but hardly account for the large subsidies given to great corporations.

As far as your critique of cooperatives,

Your point on incentives don’t make sense. How do incentives decrease when workers are given a chance to directly benefit from an increase in productivity? Wouldn’t incentives increase if a carpenter received an equal portion of profit combined with a guaranteed – though smaller – wage? Even if that wage were not there, wouldn’t direct benefit bring more incentive than the wage system? I think you’re grasping for straws.

On information, it’s actually quite the opposite. In management you learn to delegate downwards for the exact purpose of putting managerial decisions to the closest proximity of production. Firms tend to want to decentralize when doing major overhauls for the pure reason that the smaller the bureaucracy, the larger the information base.

Governance problems? Well, I guess you’ll just have to call us Anarchists then…

Charles Hueter November 10, 2008 at 2:58 pm

Niccolo, I’d wager that by “governance problems” Mr. Klein means the internal systems of process and decision-making that any organization must have in order to function. From that perspective, there are indeed potential governance problems with completely flat organizational structures, some of which can only be overcome peacefully by an organizational membership motivated to put aside their differences.

Niccolo November 10, 2008 at 3:05 pm

I realize what he’s talking about, which is basically the whole transaction costs gig.

I simply think it is unimportant to our mode of political economy and that it can be overcome to improve the structure of firms.

Som November 10, 2008 at 3:22 pm

I think there is a workable example of how big corporations might be in anarcho-capitalist societies. Look at the internet and it’s virtual “anarchy”. There are tons of “small entrepreneurship” sites and services to very large “corporations” on the web (think yahoo or google). Granted these grand internet companies’ operations and structure are rather different (even in this state of affairs) that from other corporations like GM or wal-mart (less hierarchical stratification in the internet companies I suppose). Either way, employees and entrepreneurs in an ancap society are responsible to make their own workplaces for themselves, whether within the structure of a corporation, or starting their businesses and ventures. How big or small these companies will turn out will be battled out between the independent spirit of employees and entrepreneurs and the demands of consumers.

Peter G. Klein November 10, 2008 at 3:37 pm

Niccolo, you need to read the links above, especially

http://organizationsandmarkets.com/2007/04/04/vaguely-defined-property-rights/

Decentralization within the firm has both advantages and disadvantages. On the free market firms will tend to balance these at the margin. By no means would we expect all firms to shrink to small, flat, egalitarian teams.

Stephan Kinsella November 10, 2008 at 3:51 pm

Great comments, Klein. Jesse Walker notes the controversy on the Reason blog.

Vince Daliessio November 10, 2008 at 4:02 pm

Niccolo said;

“Your account of anti-trust being an indication that “smaller firms wield power” is not really a convincing one.

I agree. Anti-trust is not an indicator of the power of smaller firms vis-a-vis larger firms. It is simply a pragmatic realization of the fact that in a nominally democratic corporatist state, cartels are simply better suited than monopolies. Cartellization is the fundamental goal of anti-trust.

Peter November 10, 2008 at 5:47 pm

Wouldn’t incentives increase if a carpenter received an equal portion of profit combined with a guaranteed – though smaller – wage? Even if that wage were not there, wouldn’t direct benefit bring more incentive than the wage system?

No. Obviously no. That’s why wages exist – your carpenter gets paid in advance and without any entrepreneurial risk of loss.

Vince Daliessio November 10, 2008 at 5:47 pm

Niccolo said;

“Your account of anti-trust being an indication that “smaller firms wield power” is not really a convincing one.

I agree. Anti-trust is not an indicator of the power of smaller firms vis-a-vis larger firms. It is simply a pragmatic realization of the fact that in a nominally democratic corporatist state, cartels are simply better suited than monopolies. Cartellization is the fundamental goal of anti-trust.

Roderick T. Long November 10, 2008 at 5:57 pm

I think Peter and I have a thymological disagreement, not a praxeological one. We both agree that there are governmental benefits and governmental burdens flying in all directions; the question is whether there’s any perceptible systematicity as to the direction of benefits and burdens.

One factor that needs to be taken into account is the surreal insanity that actually characterises the daily work experience in large businesses — “Dilbert” is popular because it’s so depressingly accurate. It’s a lot to swallow to suppose that that situation owes little or nothing to governmental distortions.

Peter G. Klein November 10, 2008 at 8:15 pm

Roderick, I do think our disagreement is thymological, but not exclusively so. I mean, we can do better than Dilbert, can’t we? There’s a huge literature on the purely economic benefits and costs of alternative organizational forms, on firm size, scope, and complexity, on centralization and decentralization, and other organizational and managerial issues. I find it frustrating that you seem unwilling to engage this literature, or even to acknowledge it, while making sweeping statements like the one quoted above.

In particular, I’m baffled by the left-libertarian fascination with worker-owned and -managed cooperatives. As I mentioned in my post, this strikes me as a purely aesthetic preference — power to the workers, down with cubicles and pointy-headed bosses! — without much basis in the theory or historical practice of actual cooperatives. Again, there’s a big literature on the economic organization of cooperatives. Even today, in the “corporatist” economy, they dominate in some sectors, such as agricultural production and processing. Like any form of organization, they have benefits and costs. They’re no panacea!

My guess is that in a hypothetical society in which cooperatives were the main organizational form there would be a funny cartoon about the mind-numbing inefficiency — the endless group meetings, the continual arguments among stakeholders, the culture of complacency — in the coop world.

Vince Daliessio November 10, 2008 at 9:52 pm

Large, vertically-structured organizations often do a very good job at recruiting smart, talented people, then completely ignoring their potential unique contributions, and turning them into low-functioning, button-pushing monkeys. Meanwhile, horizontally-structured companies, ostensibly better able to respond quickly to challenges and make the maximum use of their people, can also be incredibly dysfunctional, full of turf battles and fiefdoms, and very destructive intra-office liasons. So there is no a priori superiority of one type of corporate organization over another. The key to sustainable success appears to be management competence.

Bruce Koerber November 10, 2008 at 10:01 pm

I appreciate the discussion but in a way it cannot be resolved definitively in the minds of those on either end of the spectrum of thought. Time will tell, when classical liberalism societies develop and operate within a classical liberalism civilization.

We do know that the entrepreneurial spirit will find information and disseminate information and find the best means to do that.

Stephan Kinsella November 10, 2008 at 10:34 pm

Roderick: “One factor that needs to be taken into account is the surreal insanity that actually characterises the daily work experience in large businesses — “Dilbert” is popular because it’s so depressingly accurate. It’s a lot to swallow to suppose that that situation owes little or nothing to governmental distortions.”

The Dilbertish portrayal of the “daily work experience” as depressing has a Marxian whiff about it, doesn’t it? And it lacks a sense of perspective–cubicle life seems far preferable to working in the coal mines, which itself must have seemed preferable to a pre-industrial hand-to-mouth subsistence existence.

Also it seems likely even if mega-corporations disappeared, people would still find ways to complain about their bosses and the various distasteful aspects of work. It’s labor, after all, not leisure. Surely in anarcho-libertarianism, the nature of man and labor won’t magically transform… will it?

Stephan Kinsella November 10, 2008 at 11:05 pm

Roderick:

“Culprit #3: libertarians themselves. Alas, libertarians are not innocent here—which is why the answer to my opening question (as to whether it’s fair to charge libertarians with being apologists for big business) was no and yes rather than a simple no. If libertarians are accused of carrying water for corporate interests, that may be at least in part because, well, they so often sound like that’s just what they’re doing (though here, as above, there are plenty of honorable exceptions to this tendency). Consider libertarian icon Ayn Rand’s description of big business as a “persecuted minority,”[14] or the way libertarians defend “our free-market health-care system” against the alternative of socialized medicine, as though the health care system that prevails in the United States were the product of free competition rather than of systematic government intervention on behalf of insurance companies and the medical establishment at the expense of ordinary people.[15] Or again, note the alacrity with which so many libertarians rush to defend Wal-Mart and the like as heroic exemplars of the free market. Among such libertarians, criticisms of corporate power are routinely dismissed as anti-market ideology. (Of course such dismissiveness gets reinforced by the fact that many critics of corporate power are in the grip of anti-market ideology.) Thus when left-wing analysts complain about “corporate libertarians” they are not merely confused; they’re responding to a genuine tendency even if they’ve to some extent misunderstood it.

Kevin Carson has coined the term “vulgar libertarianism” for the tendency to treat the case for the free market as though it justified various unlovely features of actually existing corporatist society.[16] (I find it preferable to talk of vulgar libertarianism rather than of vulgar libertarians, because very few libertarians are consistently vulgar; vulgar libertarianism is a tendency that can show up to varying degrees in thinkers who have many strong anti-corporatist tendencies also.) Likewise, “vulgar liberalism” is Carson’s term for the corresponding tendency to treat the undesirability of those features of actually existing corporatist society as though they constituted an objection to the free market.[17] Both tendencies conflate free markets with corporatism, but draw opposite morals; as Murray Rothbard notes, “Both left and right have been persistently misled by the notion that intervention by the government is ipso facto leftish and antibusiness.”[18] And if many leftists tend to see dubious corporate advocacy in libertarian pronouncements even when it’s not there, so likewise many libertarians tend not to see dubious corporate advocacy in libertarian pronouncements even when it is there.”

The example given about vulgar libertarianism–those libertarians who defend Wal-Mart [SMASH THERE WINDOWZ] is not apt: “note the alacrity with which so many libertarians rush to defend Wal-Mart and the like as heroic exemplars of the free market. Among such libertarians, criticisms of corporate power are routinely dismissed as anti-market ideology. (Of course such dismissiveness gets reinforced by the fact that many critics of corporate power are in the grip of anti-market ideology.) Thus when left-wing analysts complain about “corporate libertarians” they are not merely confused; they’re responding to a genuine tendency even if they’ve to some extent misunderstood it.

What is worng with defending Wal-Mart as an exemplar of the free market? They are! This is despite state interventions. And it is indeed true that criticisms of corporate power are usually anti-market ideology, and should be dismissed as such. Critics of corporations are in the grip of anti-market ideology, as Roderick notes. When left-wingers complain about corporate libertarians, they are confused. They are not responding sincerely or honestly to a genine tendency. Proper libertarianism does not engage in the vulgarism Carson notes–it is selective. We libertarians are of course opposed to state involvement in business, and to corporate influence over the state. We’re against individual human beings voting the wrong way or endorsing or pushing for bad laws too-but we are not against people. There’s nothing wrong with pointing out imperfections in our system–subsidies etc. As far as I am concerned, most libertarians do NOT fall prey to the “vulgar libertariansim” of Carson–it’s just a straw man. Vulgar liberalism is very real however, so I think it’s unjust to equate them.

Neil Ball II November 10, 2008 at 11:32 pm

Dr. Klein,

Is an employee-owned firm necessarily considered a cooperative?

Benjamin Darrington November 10, 2008 at 11:41 pm

“Certainly large firms benefit from the state. But so do small firms.”

This is obviously true, and on some level, we can not what average firm size, organizational structure, etc. would look like on the free market.

On the other hand, it doesn’t make sense to be agnostic about the outcome we can expect. On a theoretical level, what interests can we expect to capture the most benefits from the state? Obviously big, centralized, firms are better positioned to engage in rent-seeking than small firms and stand to get a bigger bang for their buck from lobbying, leaning on regulators, etc. than smaller firms.

Peter G. Klein November 10, 2008 at 11:44 pm

Neil, the term “cooperative” is used somewhat inconsistently in the literature. A more precise term for what I’m talking about it “patron-owned firm.” This includes firms that are owned by employees, those owned by customers (e.g., a rural electric cooperative), and those owned by suppliers (e.g., an agricultural marketing cooperative). The alternative is an “investor-owned firm.” Patron-owned firms offer several potential advantages: patrons may have specific knowledge about the firm’s operations, they tend to have a long-term interest in the firm, and they may have a sense of “commitment” to the firm’s success. On the other hand, the fact that their equity shares aren’t traded on secondary markets causes several problems: patrons may face conflicts of interest between their roles as patrons and their roles as equity owners; patrons at various life stages have different time horizons; patrons have difficulty diversifying their portfolios; and so on. My “vaguely defined property rights” post linked above has some references on this.

Neil Ball II November 11, 2008 at 12:10 am

Dr. Klein,

Thank you for your response. The topics raised in Dr. Long’s article have been a major source of contention for me with regard to shaping my understanding of the way things are. Your clarification of the definition helps put things into perspective.

However I’m still confused about the equity shares in your example. On a free market, assuming that there are no contractual obligations barring the sale of equity shares, could equity shares held by patrons be sold at all?

Sergio Méndez November 11, 2008 at 7:30 am

Mr Klein:

Althought I agree Roderick needs to answer your crticisms regarding cooperatives and worker managed buisness with something more than Dilbert, I also wonder how existing cooperatives analized in the “extense literature” you mention, are cooperatives in the sense left libertarians speak. I do not know how the case works in the US, I know more the case of my country ( a third world country, Colombia) were “cooperativist” sector is large, but has little to do with anything coperativism has traditionally stood. Here cooperatives usually are just organizations set to do big buisness dirty jobs or are just traditional buisness (and in that sense, hierarchical, exploitative) holding that name in the sake of law given benefits. So I am not sure citing the analisis of existing cooperatives is necesarelly a good indicative of how they will work in a true free market system.

Jeremy November 11, 2008 at 8:01 am

I don’t see why it’s equally speculative to claim that current business institutions are of the same form that they would assume in a genuinely freed market.

There’s nothing wrong with speculation, of course, but Kinsella should tone it down a bit. We disagree on predictions about what a freed market would look like. We don’t disagree on the principle of a voluntary society.

In other words, nobody’s saying “It’s not a free market unless there are no giant corporations”. It’s simply a speculative prediction, based on a particular analysis and particular arguments (and yes, particular values and preferences).

Wouldn’t one expect a vibrant libertarian movement to have a wide variety of aesthetic and organizational preferences represented in it under the aegis of the voluntary society? It would be a shame to get caught up in the superficial trappings of something as fleeting as a prediction, when we share so many principles in common.

Jesse Walker November 11, 2008 at 8:58 am

It seems clear to me that, at the very least, the “more local and more numerous” claim is correct, if not in every sector than certainly in the economy as a whole. Removing occupational licensing laws alone would unleash such a flood of tiny enterprises — many of them one-man or one-woman shows, sometimes run part-time — that I doubt the elimination of antitrust law and small-business setasides would offset it. Especially when large businesses have proven so adept at using antitrust and setasides for their own purposes.

Technically, the aforementioned one-person enterprises would be employee-owned. They certainly wouldn’t be hierarchical. So on those grounds alone, Roderick’s comment that “many” of the new firms would “probably” be worker-owned is defensible, though I suspect he meant something more than that.

I have more to say on the subject, but probably should reserve it for the inevitable followup post on Hit & Run, when I stop merely linking to these discussions and start adding my own two cents.

Peter G. Klein November 11, 2008 at 9:20 am

Neil, by definition, a patron-owned firm limits equity claims to patrons (workers, customers, or suppliers). If patron-owners can trade their shares to non-patrons, then the firm would be an investor-owned firm. (An investor-owned firm can of course have some patron owners — e.g., there’s nothing stopping Microsoft employees from buying Microsoft stock or being granted stock or stock options as part of a compensation plan.) Proprietorships and partnerships are patron-owned in this sense. Corporations (including limited liability companies and what the tax code calls S-corporations, as well as the more traditional C-corporation) are investor-owned firms. There are also investor-owned firms whose equity is not publicly traded (venture-funded startups, corporations that have been taken private in an LBO, etc.).

Henry Hansmann’s book The Ownership of Enterprise (Harvard University Press, 1996) is a great source on this.

Peter G. Klein November 11, 2008 at 9:24 am

Sergio, that’s a good point. The literature I’m referring to does treat cooperatives as qualitatively different from other firms (see my comment to Neil about “patron-owned” versus “investor-owned” firms). It’s not just a legal distinction or a marketing gimmick, but a substantive difference. I’m not sure if this is exactly what the left-libertarians have in mind.

Niccolo November 11, 2008 at 11:14 am

Peter,

Please, do not speak to me as though I’m a mere child. I’ve read a great deal on managerial economics and Coase theorem. I, unlike most people here, actually work in the management field and so most of what you’re saying is not knew.

Don’t believe that just because you think X that means I don’t know what it means. I simply disagree with you.

I’ll give you another example. The mercantile exchange in Chicago, absent the centralizing force seen in the NYSE, trades at a much more effective level than NYC does.

The facts and popular trends simply disagree with your views here. Coase is old, tired, and increasingly incapable in the way of management.

Decentralization is what’s breaking way in the age of technology and easy information. Transaction costs are disappearing – if they ever existed in the first place.

As for the carpenters, again, you’re wrong. Many carpenters are private contractors, most in the area that I worked in – I used to be a carpenter and so this is why I picked the example – they work mostly on contract labour and if employed usually work specifically for the benefits using the employer mostly as an insurer and not as an actual manager.

Worker’s self-management is what we Mutualists want and to make it as decentralized and democratic as possible.

Peter G. Klein November 11, 2008 at 11:25 am

Niccolo, that sounds like a conversation-stopper to me. Readers can decide for themselves if your assertions — e.g., “Transaction costs are disappearing – if they ever existed in the first place” — are sensible. I’ll keep my opinion to myself.

By the way, you’re right that Coase is old — 97, the last time I checked — and presumably gets tired pretty easily. So would you at that age. But attacking his skills in “the way of management” seems like a low blow. :-)

Stephan Kinsella November 11, 2008 at 4:36 pm

“Rad Geek” (Charles Johnson) posted about this issue too, in The ALLied invasion of Cato. I reproduce my post here:

Some of Roderick’s comments:

“corporate power and the free market are actually antithetical; genuine competition is big business’s worst nightmare.”

This comment seems to equate “big business” and even “corporate power” with illegitimate corporatism. But in a free market, there would be corporations, with “corporate power” (whatever that means), and “big business”. (The libertarian criticisms of the corporate form per se are confused–see my post In Defense of the Corporation.)

“Corporations tend to fear competition, because competition exerts downward pressure on prices and upward pressure on salaries;”

Isn’t this true of not just corporations, but all market actors?

“It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market.”

I take it “corporation” is used here as a proxy for “big business”… Of course small businesses and even non-profits may be organized legally as a corporation, without this hostility.

“In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned); prices would be lower and wages higher; and corporate power would be in shambles”

Again–this is speculation, and driven by perhaps esthetic preference, as Klein notes in his comment:

“From this they conclude that smaller, more “egalitarian” enterprises, such as worker-owned cooperatives, would tend to flourish under the free market. … The problem is that their argument cuts both ways. …. Decentralization within the firm has both advantages and disadvantages. On the free market firms will tend to balance these at the margin. By no means would we expect all firms to shrink to small, flat, egalitarian teams. … I’m baffled by the left-libertarian fascination with worker-owned and -managed cooperatives. As I mentioned in my post, this strikes me as a purely aesthetic preference — power to the workers, down with cubicles and pointy-headed bosses! — without much basis in the theory or historical practice of actual cooperatives. …. “

Roderick again:

“There are three different groups that must shoulder their share of the blame. Culprit #3: libertarians themselves. .. note the alacrity with which so many libertarians rush to defend Wal-Mart and the like as heroic exemplars of the free market. Among such libertarians, criticisms of corporate power are routinely dismissed as anti-market ideology. (Of course such dismissiveness gets reinforced by the fact that many critics of corporate power are in the grip of anti-market ideology.) Thus when left-wing analysts complain about “corporate libertarians” they are not merely confused; they’re responding to a genuine tendency even if they’ve to some extent misunderstood it.”

What is wrong with defending Wal-Mart as an exemplar of the free market? They are! This is despite state interventions. And it is indeed true that criticisms of corporate power are usually anti-market ideology, and should be dismissed as such. Critics of corporations are in the grip of anti-market ideology, as Roderick notes. When left-wingers complain about corporate libertarians, they are confused. They are not responding sincerely or honestly to a genine tendency. Proper libertarianism does not engage in the vulgarism Carson notes–it is selective. We libertarians are of course opposed to state involvement in business, and to corporate influence over the state. We’re against individual human beings voting the wrong way or endorsing or pushing for bad laws too-but we are not against people. There’s nothing wrong with pointing out imperfections in our system–subsidies etc. As far as I am concerned, most libertarians do NOT fall prey to the “vulgar libertariansim” of Carson–it’s just a straw man. Vulgar liberalism is very real however, so I think it’s unjust to equate them.

Onto Charles’s comments:

“Dude, I just want Sam Walton to get his cold, dead hands out of my pockets. The rest is all details, as far as I’m concerned.”

If this is the case then we non-mutualist libertarians and you have no disagreement. We also want Wal-Mart to stop doing this. That is one reason we oppose the state–because it is one means people employ to rob each their fellow men.

In any case, it seems to me that whether or not Wal-Mart and its business practices ought to be regarded with admiration, contempt, or indifference is really an importantly separate question from the question of whether or not Wal-Mart would have a sustainable business model under freed markets. If Wal-Mart as we know it could not exist but for State privileges, that’s reason enough for libertarians to be wary of reflexively defending Wal-Mart’s bidniz practices as examples of the free market at work, even if it’s not yet clear whether or not libertarians ought to find Wal-Mart objectionable

I would agree with this, but it depends on that “If” condition being fulfilled.

Roderick wrote: “In a free market, firms would be smaller and less hierarchical, more local and more numerous”

Again–I agree with Klein’s reply to this assertion.

Far be it from me to bag on Borders and Barnes and Noble — I like them each a lot. But this notion that we can just look at their current market success, under the constrained and distorted conditions of the actually-existing unfree capitalist market, in which their business model is fundamentally dependent on the use of government highways to ship huge piles of books, on the use of the government “development” machine to seize huge tracts of land and lucrative subsidies to artificially encourage big box retail outlets, and, lest we forget, on government copyright laws that forcibly restrict booksellers to a limited number of centralized, monopoly-priced suppliers; without them, any jackass with a printer or a Kinko’s card could start her own local bookstore for little more than the cost of ink and paper — the notion, I say that we can just look at their current success on the unfree market and immediately infer it to be the result of processes that would continue with no noticeable reduction in a freed market, is desperately in need of a substantive argument that has not been given.

It is of course true that it is possible that state interference makes some otherwise-viable businesses impossible (bordellos, say), and makes some otherwise non-viable businesses viable (marijuana police; military contractors; NASA). But this does not mean that a given company’s prosperity in a semi-free market is NO evidence of the (free-market) viability of its business plan. In fact I would think the burden is on the person asserting that an existing business exists only because of state favors. As Klein has noted, state action both hurts and hampers most market actors, in a variety of ways. All we know, in general, is that a given existing company presumably is profitable, that is satisfies enough consumer demand efficiently enough to turn a profit–in a hampered market in which the firm may be harmed, and benefitted, in some ways. There is no apriori reason to think that the net effect of the state intervention is positive. In fact, because the state can never create wealth on net and only destroy it, the safe presumption is that most market actors are on net harmed by state intervention–thus without further evidence, if a firm is prosperous despite the presumptive net cost of state action, that implies it would be even more prosperous in a free market.

Now if someone wants to mount a careful case that a Wal-Mart or (for Heaven’s sake) Macy’s is in fact a net recipient of state aid and not a net victim, and that it would be unable to change its business model in a free market to prosper even if it’s a net beneficiary now–fine. I’m sure libertarians would then agree that this tax-eating business model is not a libertarian ideal. But it seems rather that these leftist coop aesthetic preferences are coloring not only what is favored here by the left-libertarians but their predictions and analyses.

Jeremy November 11, 2008 at 6:44 pm

But it seems rather that these leftist coop aesthetic preferences are coloring not only what is favored here by the left-libertarians but their predictions and analyses.

Well, there are arguments. Kevin Carson has blogged about his case studies of different industries and businesses.

You could, of course, disagree with us and remain unconvinced. In fact, if you did, I would feel rather comfortable in saying that you’re not a left libertarian. I would also feel comfortable leaving it at that.

But the burden of proof is not on us, because there’s nothing to prove, in my view – it’s total and absolute speculation (as is your contention that most big businesses would be A-OK in a free market). You either find it convincing or not – just like I find your arguments in favor of corporate personhood and limited liability unconvincing, even though the only way to prove or disprove them is to realize the free market we always talk about.

Araglin November 11, 2008 at 10:30 pm

For what it’s worth, I think it’s important to keep the issue of (i) whether libertarianism should (non-coercively) promote ‘artisans and small shopkeeps’ over against Big Business on what Charles Johnson has called ‘consequential thickness’ grounds, separate from the issue of (ii) whether supra-individual legal personhood (i.e. entity status for corporations or other organizations – allowing such organizations to own property in their own name, enter into binding contracts, sue and be sued, etc.) can be justified under ideal libertarian law.

While it may be the case that most people who agree with the overall left-libertarian (Long-Johnson-Carson) story about the ‘subsidy of history’ and the like (as I do) also happen to be against the corporate form per se (because legal personhood itself is supposedly a privilege granted by the state, or because of some worry related vaguely to the strictures of Methodological Individualism), it’s not obvious that these two positions have to go together.

In fact, once one drops the ‘concession theory’ of corporate existence (for reasons to drop this theory, see Otto von Gierke, F.W. Maitland, Robert Nisbet, etc.), there’s no reason to think that the legal-personality of groups requires some sort of ‘privilege’ or contravention of libertarian rights in order to arise. Even cooperatives, labor unions, guilds, and traditional villages are corporations in the etymological sense that they are legal bodies made up of members, and that once constituted, the body as a whole has certain legal rights and duties both as to its members and as to others with whom it may deal.

For this reason, I think it’s important that in reacting against the very real dangers of vulgar libertarianism that one take certain precautions against the dangers of what one might call vulgar anti-corporatism.

Cheers,
Araglin

Stephan Kinsella November 11, 2008 at 10:45 pm

“Jeremy” wrote:

“But it seems rather that these leftist coop aesthetic preferences are coloring not only what is favored here by the left-libertarians but their predictions and analyses.”

Well, there are arguments. Kevin Carson has blogged about his case studies of different industries and businesses.

You could, of course, disagree with us and remain unconvinced. In fact, if you did, I would feel rather comfortable in saying that you’re not a left libertarian. I would also feel comfortable leaving it at that.

But the burden of proof is not on us, because there’s nothing to prove, in my view – it’s total and absolute speculation (as is your contention that most big businesses would be A-OK in a free market).

The burden is on you–if you go around assering a given ostensibly private company is not “really” private or could/would not exist in a free market.

By your standards, no company is “really” private–no one has clean hands. You guys picks the most innocuous examples — Walmart and Macy’s — not McDonnel Douglas, Blackwater, etc. Walmart and Macy’s are … BIG. You don’t “like” bigness… for whatever reasons. Who cares?

You either find it convincing or not – just like I find your arguments in favor of corporate personhood and limited liability unconvincing, even though the only way to prove or disprove them is to realize the free market we always talk about.

You guys use this “burden of proof” a lot to shift things your way. I don’t argue for “limited liability”. I simply note as a libertarian that corporations don’t need limited liability from the state. For you to argue the shareholders are personally liable for torts committed by (state-defined) “employees” of a company the shareholder happens to own shares in requires an argument–a causal one. I have yet to see one. Until it is established that shareholders ought to be personally liable for the torts committed by others, there is no need for a special exemption in the first place.

“Aragalin”: “Even cooperatives, labor unions, guilds, and traditional villages are corporations in the etymological sense that they are legal bodies made up of members, and that once constituted, the body as a whole has certain legal rights and duties both as to its members and as to others with whom it may deal.”

“Guilds” “cooperatives” “traditional villages” “labor unions”–… hey, this is a family-friendly list. No need for obscenity.

Araglin November 11, 2008 at 10:54 pm

P.S. The question of entity status should be further distinguished from the issues of (i) limited liability of shareholders for torts committed by or on behalf of a corporation and (ii) whether officers, managers, employees, and the like should be granted ‘immunity’ from liability from liability arising from their bad acts so long as they respect the corporate form, don’t treat the corporation as their alter ego, commingle funds, etc. I don’t know the Law of Corporations in all fifty states, but I think that certain features of actually-existing corporate law (regarding (i) and (ii)) likely cannot be squared with libertarian rights. To the extent this is so, these features should be condemned. However, in so doing, I don’t think it’s a good idea to simply assume the position that only ‘natural persons’ could conceivably be legal persons in the eyes of libertarian law.

Stephan Kinsella November 12, 2008 at 9:56 am

“Aragalin”:

The debate about entity status is not distinguished from the limited liabilty/related issues–that is what is debatable about it.

As for the question of “limited liability of shareholders for torts committed by or on behalf of a corporation”: no one should be granted limited liability. But the question is whether a coherent theory of libertarian causation would make shareholders necessarily liable in the first place. It is not even clear that an employer ought to necessarily be responsible for his employee’s torts–the doctrine of respondeat superior. I have yet to see a careful libertarian analysis justifying respondeat superior. Without RS, you can’t even hold the employer (whether it be a sole proprietorship, partnership, corporation, etc.) responsible for acts of employees. So you would not even reach the question of whether shareholders are themselves further responsible for the debts of the employer-firm.

Why should shareholders be personally liable for damages caused by the actions of an employee of the company they own stock in? After all, the employee is another individual. He is responsible for his own torts. Unless you can show some kind of causal nexus, like a conspiracy, why should other individuals be responsible? People simply assume that if the shareholder “owns” a part of the company, then “of course” they “should” be personally responsible for its debts (which include damages for employees’ actions, due to respondeat superior). But why is this? Shareholders have certain ownership rights over the firm’s assets, and some diluted control rights–the right to elect directors, who in turn appoint managers, who in turn hire other employees and make day to day decisions. But shareholders are not the only ones with such a tenuous level of influence over the corporation. Creditors, customers, suppliers, employees, unions, contractors–any and all of these can have various types of influence over the firm. With such a loosey-goosey implicit theory of causation, almost anyone the corporation deals with is guilty of “aiding and abetting” the company, and thus should be personally liable for torts committed by its employees. Every ship a package by FedEx–well, you gave them money, so you are liable! Ever bought a McDonald’s burger?–you are liable for the hot coffee spill in that old lady’s lap. Ever held ownership in a fund that holds bonds for McDonald’s (lent them money)? Well, you’re again liable. The little lady who mops the floor at the Kroger’s–she’s helping them to commit crimes–break her windowz!

As for the issue: “whether officers, managers, employees, and the like should be granted ‘immunity’ from liability from liability arising from their bad acts so long as they respect the corporate form, don’t treat the corporation as their alter ego, commingle funds, etc.”

Again, no one should be “granted immunity” for their “bad acts.” I am not aware that corporate law does this. If someone commits a tort, they may be sued–whether it’s an employee, stranger, manager, even shareholder. Corporate law states that shareholders are liable only to the amount of their investment–this is problematic only if it can be shown that shareholders are causally responsible for torts committed by employees in the first place.

I discuss this further in In Defense of the Corporation.)

Araglin November 12, 2008 at 10:27 am

Mr. Kinsella,

What I’m saying is that it’s a mistake to confuse the question of entity status with those of limited liability or immunity. A number of people, including solid radical libertarians, object to corporations on the ground that they are treated by the law as ‘persons,’ which is really bad (not sure why). Some of these same people confuse the question of entity status with that of limited liability, but not always. We could, after all, have entity status in the absence of limited liability (just as one sees in the Revised Uniform Partership Act).

I broadly agree with you on the question of limited liability. If you look back to the major debate on Mises Blog on this issue (with Quasibill on the other side), you’ll see that I made essentially this same argument. In sum: Individuals are responsible for their own bad acts. Others may also be responsible, but in order to establish as much, one has to tell some sort of causal story showing complicity in the bad act.

The only caveat that I would want to enter is that giving your property to someone else can be constitute the appropriate sort of causal connection, if you have reason to believe that the property will be used in connection with a tort. Hence selling a handgun to a man who manifestly has murder on his mind may render one an ‘accomplice before the fact.’ There are conceivable situations where purchasing shares of a corporation at an IPO might be analogous to this.

As to the issue of immunity, I encountered an instance of what amounted to ‘immunity’ under prevailing law, in the close corporation context several months ago, but unfortunately I can’t recall the exact details. To quote Sarah Palin, “I’ll find that for you and get back to ya.”

Mr. Glib Sarcastic November 12, 2008 at 10:41 am

“Why should shareholders be personally liable for damages caused by the actions of an employee of the company they own stock in?”

Because in the left-libertarian model, workers = “wage slaves.”

Remember, the boss-man is the Monopoly guy, with his mustache and lighting cigars with $100 bills. The boss-man controls the workers. Very 19th century outlook…

Nick Bradley November 12, 2008 at 11:49 am

I’m surprised nobody else brought this up, but isn’t fractional reserve banking a major contributor to centralization in the economy?

Your ability to access credit increases as you move up the income ladder, so if you artificially increase the availability of credit, larger firms and those at the top benefit.

If you end fractional reserve banking, businesses must use savings to expand.

Niccolo November 12, 2008 at 2:17 pm

Yes, Stephen.

Wal-Mart is an example of the free-market at work (forget about the farm subsidies that go to the farmers they farm from, the minimum wage laws, medicare, and welfare they use to subsidize their labour costs, etc.)

Well, at least you’re not quite as bad as Reismann (or whoever)… I guess.

Mr. Glib Sarcastic November 12, 2008 at 3:36 pm

Through state intervention, Wal-Mart operates in a WORLD of arm subsidies that go to the farmers they farm from, the minimum wage laws, medicare, and welfare they use to subsidize their labour costs, etc.

State intervention exists.

Therefor Wal-Mart is bad, because the world is bad.

But the blame goes to Wal-Mart and not the State.

This makes no sense.

Niccolo November 12, 2008 at 7:01 pm

Wal-Mart directly benefits from the state, pushing forth state subsidies and actively pursuing them, yet, Wal-Mart is not part of the state…?

No, *THAT* does not make sense. It’s vulgar libertarianism at its finest.

P.M.Lawrence November 12, 2008 at 7:30 pm

There are some misunderstandings that need to be corrected here.

Klein thinks that Long’s description “In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned); prices would be lower and wages higher; and corporate power would be in shambles” “is a purely speculative counterfactual”.

It isn’t. We have actual historical evidence on the point. Between the South Sea Bubble and the late 19th century, Britain shunned corporate structures except for special cases and holdovers from before. There was no standardised method of incorporation for new corporations, and exceptions like railway companies needed to justify getting their own special Acts of Parliament (banks also had some special arrangements – see below). Britain got the Industrial Revolution largely on the backs of other structures like sole proprietorships and partnerships, e.g. Boulton & Watt, with some mutual societies like the Building Societies around as well. (Jumping ahead, this why Jeremy is wrong about ‘In other words, nobody’s saying “It’s not a free market unless there are no giant corporations”. It’s simply a speculative prediction…’ – the only giant corporations were holdovers like the East India Company and special cases like the Great Western Railway.)

This period does indeed bear Long out. Britain did not give up this approach because it was worse, but because of subsidised competition from rising countries like France and Germany with their own state-assisted corporate systems; it was a race to the bottom.

Klein’s view that “The problem is that their argument cuts both ways. Certainly large firms benefit from the state. But so do small firms.” is also mistaken. He has two broad misunderstandings:-

- ‘Small firms benefit from state-funded incubators, SBIR awards, regional development grants, and a host of other interventions designed to foster “entrepreneurship.”‘ In general, no. In general, only small corporations that are also in compliance with state requirements do – it is a huge additional overhead for sole proprietorships and partnerships to set up the paperwork, audit trails, and so on, if indeed anything but a corporation is ever invited to apply. This is a hidden conflating of “firm” and “corporation”.

- “Trade barriers, war, state control of education, and a host of other interventions retard the international division of labor, reduce stocks of human capital, and lower the marginal product of labor, all of which reduce the scale and scope [of] economies that favor large-scale production”. This affects the competitiveness of mega-firms with large firms. It has no bearing on the competitiveness of smaller firms with these. It also begs the question of whether there are any material economies of scale and scope at those levels anyway; it’s something that would have to be established on a case by case basis unless some general principle could be found.

Klein further asserts that ‘the worker-owned cooperative, the partnership and proprietorship, the decentralized “open-production” system, all suffer from serious incentive, information, and governance problems, almost none of which are mentioned in the anti-corporation libertarian literature’. If there is anything to this, he should come right out and describe them, at least at the level of adverse outcomes. To the best of my knowledge, the only things like this are precisely the things that make diseconomies of scale and scope. That is, they are what stops firms like this from being large, but they do not stop them working cost effectively on the correct scales, interfacing via the market. Far from being a criticism of this sort of firm, it merely backs Long’s point quoted above.

Stephan Kinsella asks “What is [wrong] with defending Wal-Mart as an exemplar of the free market? They are! This is despite state interventions.” Kevin Carson has observed Wal-Mart in action in Arkansas. He has come to the conclusion that it actively lobbies for state support, and gets it at material levels.

Araglin is missing an important distinction in “…there’s no reason to think that the legal-personality of groups requires some sort of ‘privilege’ or contravention of libertarian rights in order to arise. Even cooperatives, labor unions, guilds, and traditional villages are corporations in the etymological sense that they are legal bodies made up of members, and that once constituted, the body as a whole has certain legal rights and duties both as to its members and as to others with whom it may deal.” He is right in what he describes, but it’s not a general thing. That is, we can’t say “a corporation is a corporation is a corporation”. What he has actually done is, set the scene for the distinction between entities that arise “naturally” (i.e. as a consequence of ordinary outworkings) as opposed to ones that only exist under a supporting structure. Byzantine Law recognised the former sort as “moral persons”, e.g. monasteries, and it didn’t recognise any that were mere artefacts without some inherent core existence of their own. Araglin is not wrong, but it would be very easy for a casual reader to slip from agreeing with this into thinking that “corporations are natural not artificial” as a general statement. Some corporations are natural; I think “moral persons” is a good term to help us get to grips with this.

Stephan Kinsella argues that ‘…to argue the shareholders are personally liable for torts committed by (state-defined) “employees” of a company the shareholder happens to own shares in requires an argument–a causal one. I have yet to see one. Until it is established that shareholders ought to be personally liable for the torts committed by others, there is no need for a special exemption in the first place.’

The situation largely depends on the chain of responsibility. At some point, the company was turned loose on the world. If shareholders retained effective control, it’s still down to them. If they didn’t, those particular shareholders that released the hounds, as it were, are responsible for what came after (as are the “hounds”). Shareholders who are not culpable are those who bought shares from previous shareholders after those let go; responsibility remains with the latter even though they are no longer shareholders. For this matter, controlling what the hounds do is what counts. Shareholders in name, e.g. through pensions funds, aren’t the controllers, the fund managers are. And so on. It’s worth reading James Buchan’s Frozen Desire to see what happened to an ancestor of his, a lawyer who was a trustee for a shareholder in an unlimited liability bank that went bust. He had to pay up.

For what it’s worth, my informed opinion is that corporate structures are of value in getting capital together quicker and easier in the first place (which really only matters in scenarios like the late 19th century race to the bottom described above), but only in special cases for actual operations; and, co-operatives are most constructive when they are producer co-operatives adding downstream value and sharing it with upstream producer/owners, e.g. Italian wine making co-operatives or the Australian Rice Growers (I did a major assignment on that one for my MBA – it had already done everything the government later wanted to do to “help”, which got the government’s nose out of joint). And you can achieve de facto limited liability even in partnerships, with anonymous partners who retain their own documentation, effectively bearer shares; they wouldn’t stick their heads up unless there was net positive value in it for them, regardless of any de jure liability. It also gives some defence against “sovereign risk”, i.e. when the government changes the rules on you, which is why continental Europe had to allow that form of corporation – the Anonymous Society – to encourage people to invest.

Robert Paul November 12, 2008 at 8:39 pm

One of the key points I take from the realistic Dilbert strip is that incredible examples of bureaucratic inefficiency abound in modern corporate America. This should be taken as very strong evidence in support of the idea that these corporations are not creatures of the free market.

For some reason this point seems to have been missed by many of you, so please let me know if I am in error and why.

Peter G. Klein November 12, 2008 at 8:40 pm

“Between the South Sea Bubble and the late 19th century, Britain shunned corporate structures except for special cases and holdovers from before. There was no standardised method of incorporation for new corporations, and exceptions like railway companies needed to justify getting their own special Acts of Parliament (banks also had some special arrangements – see below). Britain got the Industrial Revolution largely on the backs of other structures like sole proprietorships and partnerships, e.g. Boulton & Watt, with some mutual societies like the Building Societies around as well.”

I’m sorry, I don’t find this a convincing argument at all. Even during this period in England there were a substantial number of “joint-stock companies.” You are confusing “corporation” and “large state-connected enterprise.” More generally, the corporate form of organization has proliferated over long periods of time, across a wide variety of legal and political environments that varied greatly in what legal rights were granted to corporate entities. As Henry Hansmann and others have pointed out, the English corporation long predated limited (tort) liability and other privileges granted by the Crown.

“Klein further asserts that ‘the worker-owned cooperative, the partnership and proprietorship, the decentralized “open-production” system, all suffer from serious incentive, information, and governance problems, almost none of which are mentioned in the anti-corporation libertarian literature’. If there is anything to this, he should come right out and describe them, at least at the level of adverse outcomes.”

Perhaps you didn’t get a chance to read the earlier comments in this thread, or to follow the links in the original post. Please see

http://organizationsandmarkets.com/2007/04/04/vaguely-defined-property-rights/

The arguments are explained there and the appropriate references are provided.

P.M.Lawrence November 12, 2008 at 10:09 pm

‘I’m sorry, I don’t find this a convincing argument at all. Even during this period in England there were a substantial number of “joint-stock companies.”‘

So what? Go and look at the typical arrangements for mills and mines, say.

‘You are confusing “corporation” and “large state-connected enterprise.”‘

Rubbish. As a matter of historical fact, with a few exceptions, these were then the same thing, due to needing to arrange for special Acts of Parliament; however, corporations were around from before, or were created when they had other pull – I am not confusing the two categories. What is significant, though, is the large number of enterprises that were neither – and that gives us our historical precedent.

“Perhaps you didn’t get a chance to read the earlier comments in this thread, or to follow the links in the original post. Please see…”

The point I was trying to bring out was about “facts not in evidence”, in the article as written. Those things should have appeared in the body of this article, if they were material enough to be relevant, at least in headline or summary form; anyone can hand wave. It’s a valid thing to say about comments that use links, but not the right way to structure an article. But let’s use that material…

Despite a claim in the linked stuff to the contrary, those objections do not apply more generally than to structures, e.g. co-operatives, operating in contexts where they are not suited. We can easily see this from the historical success of those other things in Britain in the Industrial Revolution, and from actual outcomes for co-operatives where they are well suited (I already gave my observations on that).

jp November 12, 2008 at 11:09 pm

Klein: ‘I’m sorry, I don’t find this a convincing argument at all. Even during this period in England there were a substantial number of “joint-stock companies.”‘

Yes, but one must differentiate between different sorts of joint stock companies. Unincorporated versus incorporated and limited liability versus unlimited liability.

Looking at British history, the first joint stock companies were merely large partnerships, unincorporated, voluntary, and each member fully liable.

The first incorporated joint stock company was created in 1553 when the British crown granted it a royal charter. Joint stock companies could now operate as separate legal persons if the Crown saw fit. By the 1600s, the Crown sometimes included limited liability as one of the features of incorporation. Later on an Act of Parliament would allow for the creation of an incorporated joint stock company, bypassing the King.

In 1844 the Joint Stock Companies Act bureaucratized the technique of granting charters so that all joint stock entities could incorporate. Prior to Joint Stock Act, incorporation required expensive lobbying of king or parliament. In 1856 limited liability was granted to all incorporated joint stock companies. By 1862 unincorporated joint stock companies were declared illegal by statute, overriding common law.

So in response to Klein I would say that the banding together of shareholders in the joint stock structure was a natural outcome of market forces, but the move to incorporation and limited liability was much influenced by the state. Given that incorporation and limited liability make it much easier to raise capital and transfer ownership, a tendency to the emergence of large rather than small joint-stock entities has occurred than would have in a scenario in which the state did not encourage these features.

Peter G. Klein November 12, 2008 at 11:26 pm

jp, that’s my point exactly. The joint-stock form of organization offers numerous advantages, independent of limited (tort) liability and legal person status. On the margin, how important are these “extra” advantages? Are they enough to outweigh the costs imposed by government intervention on the modern corporation, and the benefits such intervention generates for alternative forms of organization? It is impossible to estimate the relative magnitudes of all these benefits and costs a priori. That’s why I say Roderick’s claims about what would obtain on the free market are purely speculative.

But hey, we can all agree that the ideal situation would be to remove all special privilege, for firms large and small, and let entrepreneurs decide. (Of course, I agree with Kinsella’s remarks above (Nov 11, 10:45pm) about limited liability and legal person status; it’s not at all clear to me that these convey special, and illegitimate, benefits on one particular form of organization.)

P.M.Lawrence November 12, 2008 at 11:54 pm

“The joint-stock form of organization offers numerous advantages…” – well, no, not unless you specify what the comparison is with and the circumstances obtaining. By and large partnerships offer the same advantages as those have over sole proprietorships, apart from rapid fund raising (not a huge issue when potential partners with their own private funds hadn’t been hollowed out), and there is no operational gain from making ownership tradeable independently of partner consent. And there were yet other possible structures available, such as the trust the Duke of Bridgewater set up for his canals. Those could have advantages in their turn.

But that’s taking the eye off the ball. The crucial thing is that the British Industrial Revolution was mostly carried by sole proprietorships, partnerships, family businesses and so on. It worked.

MJP November 13, 2008 at 12:41 am

Left-libertarians certainly have the history on our side, but we also have common-sense, a-priori reasoning in our favor as well. Which sounds more plausible? That the state is actively promoting a world of millions of small businesses, which would be harder for the state to monitor and control? Or that the state is promoting large, state-like corporations in order to outsource some of its command-and-control functions over the populace? It’s in the STATE’s interest to promote big business if it doesn’t already have complete socialistic control of the economy. Trying to control millions of small businesses is like herding cats.

MJP November 13, 2008 at 12:41 am

Left-libertarians certainly have the history on our side, but we also have common-sense, a-priori reasoning in our favor as well. Which sounds more plausible – That the state is actively promoting a world of millions of small businesses, which would be harder for the state to monitor and control? Or that the state is promoting large, state-like corporations in order to outsource some of its command-and-control functions over the populace? It’s in the STATE’s interest to promote big business if it doesn’t already have complete socialistic control of the economy. Trying to control millions of small businesses is like herding cats.

Mr. Glib Sarcastic November 13, 2008 at 8:36 am

“Wal-Mart directly benefits from the state, pushing forth state subsidies and actively pursuing them, yet, Wal-Mart is not part of the state…?”

Because…and wait for it… Wal-Mart is NOT the State. It depends on voluntary relationships with it’s customers.

What’s vulgar is that good men like Bill Gates and Sam Walton, who did their best to use their minds and non-coercion to trade with their customers in an EVIL system, are sneered at as “evil”…while the average IWW union thug is placed on a pedestal.

Let me also be up front in that I am not an Objectivist and disagree with Rand on many, many things, but it is vulgar (and dishonest) to single her out as an “apologist for big business” based on one comment taken out of context. As anyone who read her novels in high school knows, she had no tolerance for businessmen who used the State for their immoral gain.

I commend Mr. Klein and Mr. Kinsella for their rational take on this issue. That left-libertarians resort to dishonest pop-shots and populist window-smashing (to borrow from Mr. Kinsella) make me suspect of their position.

Silas Barta (formerly Person) November 13, 2008 at 8:58 am

I’ve become more sympathetic with Kevin_Carson’s work recently, but nevertheless, you have to be careful about *which* actions constitute “using the State to exploit others”, or you’ll come to pretty bizarre conclusions. The case of Wal-Mart is an excellent example.

Even if government was responsible for the lowered transportation costs (which of course only benefits big businesses, rather than individuals who like being able to drive …) that still doesn’t mean Wal-Mart is a partner of the State in the exploitation. Rather, the road networks were created, and *then*, having had nothing to do with them, market conditions changed, and the Waltons wisely adapted. Even today, public roads are built, whether or not Wal-Mart wants them.

So this is not a case of, “hey, we built up a stupid business model, bail us out by starting a large scale infrastructure project!” It was not a case of “hey, we want to make big profits, build roads so we can start an otherwise-stupid business model”. It was a case of, “Hey, transportation costs are lower now, let’s use the same access rights everyone else has to make better stores.”

Does anyone here really think that if roads weren’t subsidized, the Waltons would have had a complete mental shutdown due to their brains not functioning in “non-cheap-transportation” environments? That’s impossible; the genetic code simply doesn’t have enough information to build brains with that kind of blind spot. If market conditions were different, they would have — wait for it — responded differently. If I notice fancy clocks becoming popular and so I build fancy clocks to sell, my success is not “due to a subsidy from fancy clock lovers”.

Yes, I’m sure you can point to ways that Wal-Mart does genuinely exploit, but the example of “They use implicitly rely on roads they never asked for and which they have no privileged access to!” is a very poor one.

If you’re still not convinced, imagine that some wise entrepreneur was unjustly imprisoned and then, once in prison, uses his brains to operate a profitable trading business therein due to smuggling goods from the outside and otherwise brokering trades between other prisoners. Would you say that, once he has all that prison wealth, that “his success is due to the STATE!” ? Would you say that he’s responsible for the oppression of the other prisoners? That he’s exploiting them by selling them stuff? Of course not. Because that would be really stupid.

Wal-Mart’s position isn’t much different.

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