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Samizdata quote of the day Does Jobs deserve kudos for his acumen? Absolutely. That doesn’t mean I have to approve of the grotesque beast that is the modern super-corporation. It is something that could only exist in the statist world, and it is a disturbing hybrid of free market principles and ultra-authoritarian government interference, fused together in a way that brings out the very worst of all worlds.
– Commenter ‘Jaded Libertarian’
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How precisely is the existence of big corporations statist? It seems a pretty natural thing to have happen under any system that doesn’t explicitly use the state to break them up.
Gaming the patent and copyright system within a hugely expensive legal system is how a great many large corporations limit competition, and Apple is certainly one such company.
Indeed there are oh so many ways large entrenched companies use the arcane rules and regulations that pervade their industries to use the state to clobber would be market entrants. The system is intrinsically corrupting.
Indeed, Perry. Just go and take a look at what Apple is trying to do to Samsung in various courtrooms around the world, Alsadius, none of which would be possible without the state protected monopolies of copyright, patents, and a bizarre EU combination of the worst of both called “Community Design”.
Ah, you’re anti-IP. I suppose that explains that.
I’m not anti-IP, far from it, and I consider using courts and legal processes to protect such property to be no different than using such means to protect other (tangible) forms of property. (Which isn’t to say that the current IP laws couldn’t do with improvement, but that’s a matter of application, not principle.) However, I do agree that large corporations inevitably tend to capture the regulatory process and bend it to their own ends, such ends being mostly protection from new competition. This can take the form of extensive regulations (compliance with which absorbs resources which new market entrants don’t have or could better use), restrictive licencing rules, procurement policies, etc., as well as other forms of protection (such as import duties and restrictions) and even explicit subsidies and bailouts. Having deep pockets always gives one an advantage, but that advantage is further magnified when those resources are used to game the system. Which is inevitable whenever government gains power over market forces.
Alsadius:
Because the existence of any corporation is statist.
I suppose you could call me anti-IP, the recent wrangles between Apple and Samsung finally having precipitated my position on the issue.
the idea that Apple’s intellectual property trumps Samsung’s physical property is simply absurd. Samsung own the materials they are using to build their tablets, and should be perfectly entitled to do whatever they wish with them.
Paul Lockett,
“Because the existence of any corporation is statist.”
Incorrect. The corporation as we know it was invented by private businessmen in Medieval Genoa, some time around the 1400s or 1500s (I forget exactly, but it is discussed in some of the articles by economic historian Avner Greif). It was the solution to the problem of how a business can make durable agreements with others, particularly investors but not exclusively so, if the owner of the business might die unexpectedly.
That problem would not go away if the state were to vanish tomorrow. There will always be some sort of legal recognition for organizational standing, as distinct from the standing of its members.
Now, where the state does get involved is in granting limited liability to corporate owners, and similar such privileges. That is indeed a problem.
Laird: I’d certainly agree with that, but it doesn’t imply what “Jaded Libertarian” was saying. Regulatory capture exists, but it is not a necessary precursor to the existence of massive corporations.
Paul: Sure, okay, the corporate structure is a creation of governments. But that’s a really minor point, because even without corporate legal structures, you’d still have most of the same effects. Besides, wouldn’t a real libertarian be perfectly okay with people setting up a contract that aped the corporate form, even without the legal design? Your point is like saying that because the dollar is a creation of the government, that the only reason anyone has money is government.
Not really. If I am willing to do business with a company-as-a-trading-entity rather than with an individual, I should be perfectly at liberty to do so.
The fact states licence companies is extrinsic to the fact people form companies to do business and would do so in stateless setting too for many of the same reasons.
Bashing big business simply for being big is simply a reflexive prejudice that I normally associate with the brain-dead left. We should give it a boot up the arse.
If a firm has become large due to the efforts, skills and appreciation of its clients, what is the problem? None, is the answer.
Of course, there is a separate argument about things like limited liability, corporate welfare, eminent domain abuse, etc, but that is, strictly, an argument about the role of the state, not about bigness in business as such.
Ayn Rand once wrote about big business as America’s most persecuted minority. She had a point.
“Because the existence of any corporation is statist.”
If two people want to form an entity such as “Lockett and De Havilland Parners”, which is recognised by law (not necessarily statutory law) as a legal person for the purposes of enforcing contracts, holding liabilities, etc, and is dealt with by persons via consent, then so what?
One of the benefits of a complex legal order is that people can form clubs, trusts, associations, etc and those structures can have a legal “personality”. But I do not see the advantage in explanatory terms from saying these are “statist”.
Bashing big business simply for being big is simply a reflexive prejudice that I normally associate with the brain-dead left. We should give it a boot up the arse.
If a firm has become large due to the efforts, skills and appreciation of its clients, what is the problem? None, is the answer.
The point I was making is I’m not convinced the above is the sole reason Apple is the size that it is. A big part of the reason they have gotten so big is demanding legislation has created a hostile environment that favours establish companies, and intellectual property laws have given them the means to prey upon and eliminate/consume competitors who are new to the field.
In a true free market, I question whether Apple could have grown as big as it has. The current environment selects (in the evolutionary sense) for massive, aggressive corporations.
Jaded, even if you are correct about Apple’s tactics (which you may well be), I find it difficult to blame a company for using the only (statist) means available to it in order to survive. We all of us are forced by the state to play the system many of us detest, and there’s no point in resenting each other for doing so. The people truly deserving of our anger are those who support The System for the sake of its existence as a tool for wielding power over others, not for the sake of mere self-preservation.
Jaded, perhaps I should apologise for being a bit too rough in my general tone. I think you can understand, though, my frustration in how all too often, any institution that is big seems to be automatically targeted for abuse. It may be a rule of thumb in this age that big business usually gets help from government, but not always. And I am a critic of much that goes by the name of anti-trust law, which is based on the near-useless neo-classical economics view of people possessed of perfect information.
Of course, there are some (by no means all) radical free marketeers who, in addition to generally disliking IP (as referenced higher up this thread) also argue that there is a case for weakening, if not abolishing, statutory limited liability. This is a complex issue: in principle, though, LL does not seem to me to be an issue so long as people who deal with LL enterprises consent to do so. The issue, of course, is what happens with torts against third parties.
Corporate power and the free market are actually antithetical; genuine competition is big business’s worst nightmare. throughout U.S. history corporations have been overwhelmingly hostile to the free market. Indeed, most of the existing regulatory apparatus—including those regulations widely misperceived as restraints on corporate power—were vigorously supported, lobbied for, and in some cases even drafted by the corporate elite.
I guess that so many self-described ‘free marketers’ apologise for corporatism and big business is for fear of finding common cause on the ‘brain dead left’.
Alisa – the comments you have made in this and the last Jobs thread are both spot on. hats off!
monstro
Jaded Libertarian wrote:
“. . .intellectual property laws have given them the means to prey upon and eliminate/consume competitors who are new to the field.”
Let me FIFY.
‘ . . . Intellectual property laws have given them the means to protect themselves from competitors who are new to the field and trying to get ahead by selling things that were devised and developed using other people’s resources.’
Jobs and Wozniak had nothing to fear from established computer makers when they went to their garage, because they were breaking new ground. Sort-of by definition, any new invention cannot infringe on an existing patent. Similarly, an ‘smart kid’ who can dream up a better computer technology in his garage has nothing to fear from Apple’s intellectual-property lawyers, becasue if his invention is sufficiently innovative, it cannot infringe.
Apple’s intellectual property is pretty-much its only property of value – Apple PCs and I-Pads are made by semi-skilled labour in faraway places, knowing how to build them is the value-add. Their intellectual property is their box of tools, and no plumber or electrician is required to let other people use his tools free of charge. So why should Apple stand for it?
llater,
llamas
Their intellectual property is their box of tools, and no plumber or electrician is required to let other people use his tools free of charge. So why should Apple stand for it?
That’s an interesting metaphor, because those who Apple sue did not use their tools, but rather saw something they were doing and thought it was a good idea. Not so much using their wrench as seeing a neat way to install U-bends, wherupon Mr. Apple the plumber stamps his feet on the floor and screams “That’s my idea, you’re not allowed!!!”.
Now take this scenario and imagine Mr. Apple’s tantrum had the backing of the law. Imagine Mr. Apple hated new plumbers coming into the business. Imagine that it cost thousands of pounds even to respond if Mr. Apple decided to accuse you of something – even if he was proved wrong.
Then you’d have something closer to current intellectual property laws.
Jaded Libertarian wrote:
‘ . . . Not so much using their wrench as seeing a neat way to install U-bends, wherupon Mr. Apple the plumber stamps his feet on the floor and screams “That’s my idea, you’re not allowed!!!’
Bad analogy. Maybe my fault.
It’s not a question of copying Apple’s neat way of installing U-bends, it’s a question of copying Apple’s neat way ofdesigning U-bends. And Apple is right to use every means at their disposal to protect that, because their way of designing things is about-all they have, except for a bit of real-estate here and there.
If you don’t give Apple the means to protect their way of desgning things for infringers, pretty soon, there’ll be no Apple. Contrary to legend, virtually no great development in human endeavour was carried out for ‘the joy of finding things out’. They were done for profit, and if you kill the ability to profit by innovation, you will kill innovation. Note, for example, the world-beating computer-design reputation of the former Soviet Union, or the PRC.
llater,
llamas
Llama,
That’s all well and good, but the problem with intellectual property is you cannot lay claim to something in my brain. The cells in which the information is stored are mine. What’s more by releasing the info, it is residing on my property (my brain) with your consent. If you want to keep it a secret, don’t tell anyone. If you want to be able to sell something publicly it is no longer a secret. You can’t have your cake and eat it. Once I know about something, that knowledge is mine.
The way to make profit in an IP free world is to keep R&D secure so that you get a head start on your competitors who are busily reverse engineering your products. Reverse engineering to product would take even a massive company the best part of a year. Such a system requires constant innovation – which is good for everybody. It also makes the rules about what “property” is very clear indeed.
Apple are pretty good at innovation so I reckon they’d do fine even without their army of IP lawyers..
Alsadius:
You say “most of the same effects.” My concern is with the rest of the effects. Things like limited liability for torts could not be fully replicated by contract. As a real libertarian, I would be perfectly ok with people them setting up a contract that aped the corporate form. I just don’t believe they could.
It’s one of the oddities of this recurring discussion that people will defend Limited Liability by saying that LL is irrelevant, because it could be replicated by contract. As a libertarian, that would be, for me, a perfect argument in favour of abolition; why would a libertarian want a non-consensual arrangement if they believe there is an equivalent consensual arrangement.
Not really, for the reasons above. My point is more like saying that fiat currency is substantially different to a currency arising from consensual use.
Perry de Havilland:
As with Alsadius’s comment, the issue is not the advantages the state hands to the companies you trade with, but the companies you don’t.
llamas:
That’s really just begging the question. The fact that the state currently recognises a property right doesn’t define its underlying legitimacy, unless you follow a strict line of legal positivism.
Your statement could have been written in a similar way about slaveholders:
“Their slaves are their box of tools, and no plumber or electrician is required to let other people use his tools free of charge. So why should slaveholders stand for it?”
That doesn’t justify slavery.
Paul, a company could set up as a LL business and anyone dealing with it would know that. Tort vs third parties is a difficult but not insuperable one.
If owners of a limited liability company want to have their agreement enforced by law, then under a state with power to enforce law, it is “statist” in that sense but that is not statist in the sense of granting any privilege via coercion.
As Coase and others have pointed out over the years, there are good reasons why firms exist.
I’m very much an IP person philosophically (although I couldn’t care less about the current IP laws). That said, Jaded has a point: if I put a chair in a public street, I cannot expect people to not seat on it, or to not copy its design, or to not simply take it home. Such an expectation would not be sound neither morally nor practically. OTOH, if I gave/sold someone that same chair under the explicit condition that he may not copy its design, such an agreement should and can be honored. How easily it can be enforced (i.e. how practical that is) is a separate question, as the current woes of the music and film industry well demonstrate.
Thank you, monstro.
JP:
I disagree. I don’t see any way that a contractual approach could replicate the current state handout.
That aside, I come back to my previous point; if state granted LL could be replicated easily by contract, then there would be no reason to object to its abolition.
I agree, in so far as LL is enforced with regard to people voluntarily dealing with the company, but not with torts, where LL is a state granted privilege.
In short:
if current state granted LL can be replicated by contract, it should be abolished, because it is unnecessary.
if current state granted LL cannot be replicated by contract, it should be abolished, because it is a state granted privilege.
Easy really. If a person has a contractual relationship with a limited liability company (for example they purchased something from it or loaned money to it), the company’s liability is limited to that person. If they do not have any such relationship (say a company’s bulldozer runs over your car by accident) then the shareholders are collectively fully liable to the aggrieved car owner.
Paul: The corporate owners all clearly consent to limited liability, as do all the people lending money to the corporation. It doesn’t affect anyone else, but they’re all aware of it if they feel some need to boycott or what have you. What’s your complaint here? Also, fiat currency is based on consensual use. You don’t like it, good luck convincing merchants to barter with you.
And re llamas: The difference is, there’s value to the creation of intellectual property. Creation has value, and it in fact has more value when that creation is easily replicated – one book can be worth vastly more than one car, even if it probably takes less effort to create, because it can amuse millions instead of seating five.
Perry, in your example, there would be unlimited liability for torts, so it wouldn’t fully replicate the situation which exists with state granted limited liability.
Alsadius:
Limited liability for torts cannot realistically be argued to be consensual. That is why your contention that it doesn’t affect anyone else is wrong.
No, it isn’t: you (as well as said merchants) cannot pay taxes in any other currency.
So? I was just showing what limited liability without a state licence would look like… limited liability to the consenting and unlimited liability to third parties.
Perry, you responded to (and quoted) my comment:
You said “easy really” and then gave your example.
I was pointing out that your example doesn’t replicate the current state granted handout, due to the third party issue.
I could understand your “So?” if you hadn’t posted your comment in response to mine, but as you did, it just seems a bit bizarre.
“The worst of all worlds”? Silly language.
Modern America is not anything like as bad as North Korea – or many other nations.
Vast corporations, as a concept, the creation of modern statism?
Not true either.
Standard Oil was vast – but existed over a century ago. “But America was not a pure free market in the late 19th and early 20th centuries”.
America was vastly closer to a free market then than it is now.
And attacks (by various people) on the “crimes” of John D. Rockefeller (senior – his son and the rest of the Rockefellers were and are largely a waste of space, living off the genius of their forefather) are largely bullshit.
His company was a success because he produced high quality products (some of which no one had thought could be products before) better and more cheaply than anyone else.
The same is true of many of the other so called “Robber Barons” as the book the “Myth of the Robber Barons” makes clear.
As for history – the idea of a corporation (of limited libility) is not really the invention of the 19th century at all. Clubs, societies and (yes) trading companies go back as far as one cares to look (with people risking their investment in the “trading pot” – not risking their homes and the shirt on their backs).
As for the legal development of the idea – that was mostly done by Church law in the Middle Ages (so that institutions could be sued for financial losses without every member of the House, or other institution being sued as an individual). So hardly an example of modern statism.
As long as people know IN ADVANCE that they are dealing with a limited liability enterprise and CHOOSE to do so – there is nothing unlibertarian about the idea.
ON THE OTHER HAND.
It is undoubtly true that modern statism means that corporations have a much bigger role in the economy than they otherwise would.
Three examples spring to mine (and no I am not go into patents and copyrights – as that is largely a blind ally as these apply just as much to individually owned enterprises as corporations).
High individual income tax rates (50% in Britain) mean that individal trader does not stand much of chance of getting big enough to challenge a corporation.
Think about it.
If you fail you fail – if you succeed 50% of your profits just vanish to the state (on top of all your other taxes).
Also there is the Death Tax (the inheritance tax).
Say, against the odds, an individual trader manages to build up a big enterprise.
On his death it is destroyed by the Death Tax – which (not being subject to biological death) corporations do not have to pay.
In Germany (up till recently) family business enterprises could avoid the Death Tax – but not that vampire scum Warren B. has been seen even in Germany. Telling the owners of family business enterprises that the only way to save the enterprise (from the Death Tax) is to sell out to his corporation.
Lastly….
Central banking (such as the Federal Reserve in the United States).
Everyone knows that is far more straightforward for a major corporation (such as a bank) to get a sweetheart (low interest) loan from the Fed than it is for an ordinary individual to do so.
As Jaded Libertarian would be quick to point out – he can not just go to the Fed and get (on favourable terms) some of the funny money it creates.
So the banks and the magic circle of politically connected corporations they do favourable business with, have a built in advantage.
So YES the game is rigged.
My examples show that stateless limited liability companies would be better that they are now, the fact they are not ‘exactly the same’, well, so what? Your contention was that LL was a product of statism, my contention is that they are not and indeed work even better without any state involvement in how they work. Thus your remark that is not the same was not really useful. Well yeah, remove the state and things are not the same but LL companies would still exist..
Why is this JACOBINISM (this belief that there should just be the state and “atomised individuals”) so popular?
The idea of limited liability (indeed of the corporate form generally) did not really come from 19th century statures – it is an ancient one.
For example, it was developed (and had to be) in Church law in the Middle Ages (indeed the early Middle Ages and the Dark Age – when “the state”, if even existed, did not have any real legal system of its own). And yes applied to trading companies (with their common “trading pot”) even then.
If people do not like limited liability corporations then DO NOT TRADE WITH THEM.
Go to the family owned stores rather than Tesco (there are several such stores near me – in walking distance of Tesco).
And buy your insurance from a Lloyds syndicate of “Names” (unlimite liability ones).
And so on.
Of course you will have to pay HIGHER prices and have LESS choice of goods and services – but that is your choice.
And if you want to make companies less important in economic life…..
Then radically reduce the top rate of income tax (50% in Britain) and GET RID OF THE DEATH TAX.
Do these things (and get rid of Central Banking – with its inbuilt bias for subsidising, with “sweatheart” type loans, banks and other large corporations) and individually and family owned business enterprises will become more important again.
However, I suspect that SOME (not all) of the people who attack “corporations” have another agenda.
I think that if all companies vanished tomorrow they would just turn their attack on individually and family owned business enterprises.
For such “crimes” as being big (economies of scale do exist – as well as diseconomies of scale if an enterprise becomes too big to really be effectively managed) and having employees.
Perry de Havilland:
The whole point of my original comment was that current state granted corporate titles are statist privileges because they couldn’t be replicated contractually.
You seem to be attempting to counter my argument by agreeing fully with it and then tacking “so what” on the end!
Paul Marks:
For the umpteenth time, trading with an LLC is clearly NOT the main issue, it is torts and they cannot be avoided so easily
I have indicated that, without ANY state involvement, the same ‘privileges’ would exist in a non-state licensed limited liability company… if you are willing to do business with a company that expressly limits its liability, you are granting that company the privilege of limiting its liability to you.
So the notion that limited liability companies can only exist due to the state granting them that limited liability just ain’t true… hence my remark that just because currently states grant licences to limited liability, so what? As limited liability companies would exist anyway, I am not very concerned they exist under state licence, so the whole discussion seems a bit pointless.
Of all the many distorting things states do to markets, granting limited liability ain’t one of them as it would exist even if they did not as long as they did not actively prohibit the practice.
Perry de Havilland:
No you haven’t. You’ve done the opposite, because you’ve acknowledged that limited liability for torts would not exist. Here’s a direct quote where you spelt it out:
Your comments are based on two contradictory view points:
1. The limited liability privileges granted by the state couldn’t be fully replicated by contract, due to the tort issue, which would result in:
2. State granted limitied liability isn’t a privilege, because:
It seems like you are acknowledging the tort issue when talking about it directly, but then ignoring it when talking about the wider issue, because it doesn’t fit with the conclusion that you’ve already drawn.