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Corporations Are Not Free Market Entities

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July 05, 2012 – Comments (9)

DavidKretzmann.com 

9 Comments – Post Your Own

#1) On July 05, 2012 at 1:14 PM, whereaminow (< 20) wrote:

Great vid!

Spooner was no nut bag, of course. He was about to put the US post office out of business, but Congress threw their weight into it and shut him down.

Not only were the first corporations created by governments, they were businesses run by European bureaucrats, trying to make a buck as merchants-on-the-side. They figured they could use their connections to outdo their competitors.  But they failed. And so instead of paying up on debts owed, they wrote legislation giving them legal protection by law.  Voila!  The corporation was born.

The question still left unasked is, could such a legal structure be formed in a free market?

I've never understood how Occupy can reconcile their belief that libertarians are tools of the corporations with the lack of corporate support for libertarians (as opposed to mainstream candidates.) It must take tremendous cognitive dissonance.

David in Liberty

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#2) On July 05, 2012 at 2:02 PM, leohaas (31.85) wrote:

True.

A corporation could not be formed in a true free market. It is a legal construct, sanctioned by Government.

We can wonder whether that is good or bad.

I for one would never go into business without forming a corporation. If the business fails, I don't want to be personally liable for the debt incurred by the business! If a product my business made causes someone harm, I don't want to be personally liable for the damages.

If the legal construct we call "corporations" were not available, who would go in business?

Perhaps a totally free market is not such a good idea...

PS  The Post Office is created by Congress per Article One of the United States Constitution, so I don't see how Libertarians could oppose it!

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#3) On July 05, 2012 at 2:19 PM, SkepticalOx (99.42) wrote:

I've never understood how Occupy can reconcile their belief that libertarians are tools of the corporations with the lack of corporate support for libertarians (as opposed to mainstream candidates.) It must take tremendous cognitive dissonance.

I honestly think the Occupy people just swipe libertarians along with all the conservatives/Republicans/the status quo/the man. When you view the current system as "free-market capitalism", when it's not really, then it's pretty simple to bunch libertarians in the same group as the cronie capitalists. 

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#4) On July 05, 2012 at 4:55 PM, chk999 (99.97) wrote:

I for one would never go into business without forming a corporation. If the business fails, I don't want to be personally liable for the debt incurred by the business! If a product my business made causes someone harm, I don't want to be personally liable for the damages.

And this is the key bit right here. Without limited liability, there would be far less investment. With far less investment, less output and hence a poorer world. Lloyds of London used to have unlimited personal liability for the names. That did not work out well and that model has not been replicated. 

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#5) On July 05, 2012 at 5:56 PM, mtf00l (44.78) wrote:

Actually, if the corporation is thinly capitalized the corporate veil can be pierced and full liability will be placed on the owner of the corporation and their assets.

So the answer to both questions, who would start a business without incorporating and who would start a business if there were no such thing as corporations would be those who can afford it monetarily and/or politically.

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#6) On July 05, 2012 at 7:37 PM, whereaminow (< 20) wrote:

chk999,

If no one would open a business without limited liability... if this were indeed true... then there would never have been any businesses.

Simply because something is now, that doesn't meant that it is preferable to something that is not.  That is a logical fallacy.  We need to use sound deductive reasoning to determine whether or not the end result would be more economical.

On the surface, it appears so, since investment in the form of credit with limited liability dominates our current market.  But I suspect a deeper analysis of the role of property rights in allocating resources will show us that full liability would actually lead to quicker market corrections and faster synthesis between consumer preferences and production.

Certainly more needs to be said on this topic either way.  

David in Liberty

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#7) On July 05, 2012 at 7:42 PM, whereaminow (< 20) wrote:

mtf00l,

So the answer to both questions, who would start a business without incorporating and who would start a business if there were no such thing as corporations would be those who can afford it monetarily and/or politically.

That would indeed be weird, since today, only those who can afford it incorporate. While those who cannot, don't bother.

I think it would be helpful if people realized that free markets are not much like what we have today. In a free market, one could limit their liability, however, that limitation comes solely from an agreement with the consumer and for the terms specified in the agreement. It's not a blanket liability granted by the State.  There are ways that more encompassing agreements could be made, and much has been written on that topic in the field of Austrian Economics.  But it's kind of silly to try to explain how things would work when people are free. It's like trying to explain to a person living under food rations exactly what McDonald's would be and where it would be and how it would operate before McDonald's existed.

David in Liberty

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#8) On July 06, 2012 at 4:23 AM, LongShortIndex (30.22) wrote:

Wondering why things aren't changing for the better and why rich corporations are gaining stronger footholds?

YOU. You are enabling this at the heart of the system by holding even miniscule deposit money at the largest banks - they & corporations love OtherPeoplesMoney!

STOP IT NOW!

A bank can only be in business and be solvent as long as there are depositors money to support their assets. YOU, your friends, family, coworkers are providing a LIFELINE to these banks with your $50 here, and $50 there in bank accounts.

SOLVE this now by moving the funds into a community bank or credit union (and support the economy of your area instead of supporting these fraudsters playing with OtherPeoplesMoney in asia, europe, wall street, & Wash DC economies). This also effectively changes voting representation in the regional central bank offices. You should have $0 in deposits at Wells Fargo, JP Morgan Chase, BofA, Citi, Barclays, and HSBC! Don't be ignorant, learn that most community banks & credit union networks provide the same conveniences as the above mentioned entities.

Doing the above is simply more powerful than most people's votes.

As for the political process, well...

Bush = Obama = Romney = Pelosi = Gingrich

they all want bigger government

they all support central banking monopoly

they all push for keynesian policies

they all ensure mega corporate power with larger govt.

they all push for higher tax on middleclass (whether actual taxes or inflation tax)

they all support UN & wars

they all support the enabling of white collar crimes/loopholes (without real, pervasive penalties)

the policies set forth by these 'officials'/govt ppl are making the poor become poorer and destroying the middle class.

1) the solution is to recognize the corrupt two party system (and how the democrats and republicans have worked cohesively together in killing REAL debates in this country in over the past couple of decades)

2) after recognition of 1), you should identify the few in either party that has actually voted what they preach, & what they preach goes against the mainstream congress

3) support the few real representers of the american people in either side, and become involved yourself in the political races

4) educate others, talk to friends family, and engage strangers in public with identifying ppl who are wronging us (and also righting us)

5) understand we may not need more legislation today (and in the future), but instead, may need to massively undo most legislation of the past few decades to get to a better place

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#9) On July 06, 2012 at 12:03 PM, chk999 (99.97) wrote:

whereaminow - The computer you typed that on uses chips made in a "fab". Fabs cost two billion now. How do you finance that without limited liability? True partnerships can only go so big before the number of partners required becomes unfeasible. Why has the Lloyd's model of unlimited liability not been widely replicated? Doing without computers is not an option I favor, so getting rid of corporations sounds like a bad idea. 

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