The Corporation: A Thing of Power and Beauty

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    Jan 31, 2011 2:28 AM GMT
    From a constitutional law prof: http://www.professorbainbridge.com/professorbainbridgecom/2011/01/the-corporation-a-thing-of-power-and-beauty.html

    Pish posh. When I teach corporate law, I tell my students about Nicholas Murray Butler, president of Columbia University and winner of the Nobel Peace Prize, who wrote that: “The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company.”

    I tell them about journalists John Micklethwait and Adrian Wooldridge, whose magnificent history, The Company, contends that the corporation is “the basis of the prosperity of the West and the best hope for the future of the rest of the world.”

    And so I also tell them that the corporation has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest. As Michael Novak argues, private property and freedom of contract were “indispensable if private business corporations were to come into existence.” In turn, by providing centers of power separate from government, corporations give “liberty economic substance over and against the state.”

    We should be eternally grateful that slave owning, miscegenating, Jacobin-leaning Jefferson failed to squelch the corporation.

    BTW, the Southern agrarian strain of anti-corporation feeling is filed away as a future project.
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    Jan 31, 2011 2:31 AM GMT
    *sees bait obscuring sharp hook, swims away*

    icon_lol.gif

    You forgot, and so did he, the word SOME.

    icon_wink.gif


    PS the tobacco companies are sending you a Valentine.
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    Jan 31, 2011 2:41 AM GMT
    meninlove said *sees bait obscuring sharp hook, swims away*

    icon_lol.gif

    You forgot, and so did he, the word SOME.

    icon_wink.gif


    PS the tobacco companies are sending you a Valentine.


    It's absolutely silly - and some might even say mind numbingly stupid to believe that corporations act as a single entity when they all compete for resources clients and exist in different industries.

    While it's not necessarily a causal relationship, it is useful to consider the types of countries that do not grant legal status to corporations and they are invariably very poor and despotic. It's obviously an innovation that many people do not understand well given that at its core, there are always people behind a corporation.
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    Jan 31, 2011 2:44 AM GMT
    Corporation. n. An ingenious device for obtaining profit without individual responsibility.
    Ambrose Bierce

    (I play Civ wayyyy too much)icon_lol.gif
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    Jan 31, 2011 2:47 AM GMT
    q1w2e3 saidCorporation. n. An ingenious device for obtaining profit without individual responsibility.
    Ambrose Bierce


    So sayeth anyone who hasn't tried to run one or own a significant part of one.
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    Jan 31, 2011 2:48 AM GMT
    Actually I'm part owner of an LLC. icon_lol.gif
    Correction: 2 LLCs if you count the (small) part ownership I have in another LLC related to my job. Soon to be 3 if plans for expansion are brought to fruition in the next year or so. All in conjunction with a medium sized national chain...
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    Jan 31, 2011 2:50 AM GMT
    q1w2e3 saidActually I'm part owner of an LLC. icon_lol.gif


    I'd generally extend that to any business in general to own a *significant* part of one or run one. Generally speaking full of stress and risk! Though I can't say the rewards aren't there for those who succeed and that's what entrepreneurs (and their investors) do it.
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    Jan 31, 2011 2:58 AM GMT
    I point to Putin's Russia, Venice, and the East India Company for how the corporation is not necessarily linked to freedom.
    Oh yeah, China (in its present form anyway).
    And The Cape (the TV series), if you know what I mean.
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    Jan 31, 2011 3:09 AM GMT
    q1w2e3 saidI point to Putin's Russia, Venice, and the East India Company for how the corporation is not necessarily linked to freedom.
    Oh yeah, China (in its present form anyway).
    And The Cape (the TV series), if you know what I mean.


    That isn't the argument of the original author. His argument is that "the corporation has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest."

    In the examples you list, the lack of rights is a direct impediment to the growth of corporations for the broader fact that rule of law is questionable at best. In Russia and China however, the growth of corporations have lead to significant gains in the economic condition of the average worker (though gains in the country remain elusive at least for China). I also note that the East India Company was effectively a tool of the British state and favored as such - again a rather poor misread of what the original author argues.
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    Jan 31, 2011 3:26 AM GMT
    OK, so the economic liberty of Indians was maximized by the East India Company, which was a corporation owned by British citizens...
    Same thing seen in the economic liberties of the Egyptians and Saudi Arabians, maximized by American-dominated oil corporations influencing American policies on promoting stability in the Middle East.

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    Jan 31, 2011 3:33 AM GMT
    I had a LLC of my own involving my rental property, It worked out great for not paying any appreciable taxes. It has its place for sure and is helpful for the small operator, in a lot of ways.


    but something has gone wrong with the system because the old maxim, what's good for business is always good for America, has turned on us somehow, now its totally about the bottom line, the hell with the workers, and the hell with America. Corporations have become the proverbial snow ball thats too big to control !!!
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    Jan 31, 2011 3:37 AM GMT
    And the economic liberty of the average US worker surely is maximized by corporations too big to fail which are thus able to influence government bailouts and tax benefits of off-shoring jobs.
    No liability, yay! (Despite what the Democrats wrote in their report about the financial meltdown, which is sure to be contradicted by not one but two Republican-penned reports)
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    Jan 31, 2011 3:48 AM GMT
    q1w2e3 saidOK, so the economic liberty of Indians was maximized by the East India Company, which was a corporation owned by British citizens...
    Same thing seen in the economic liberties of the Egyptians and Saudi Arabians, maximized by American-dominated oil corporations influencing American policies on promoting stability in the Middle East.



    Again, you entirely (and deliberately) misread what the author argued. With respect to the East India company that did nothing of the sort but it was also a state actor - a foreign state no less - not about the creation of corporations or rule of law. As for Egypt and Saudi Arabia - American-dominated oil corporations? For the latter and the former? I'm curious if you know where most of the oil goes in Saudi Arabia or the power of Aramco relative to these other supposedly American dominated oil corporations.

    As for no liability? You are aware that the corporate veil can in fact be pierced.
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    Jan 31, 2011 4:54 AM GMT
    Is there a point to this thread? Are corporations on the verge of being wiped out of existence?

    I don't believe that is in the offing, so I presume this is more pro-corporate "poor downtrodden capitalist" ramblings. icon_rolleyes.gif
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    Jan 31, 2011 5:09 AM GMT
    Christian, it's bait and hook. Believing in the glory of corporations is about as silly in believing in the infallibility of any government.

    -Doug
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    Jan 31, 2011 5:31 AM GMT
    jprichva saidComes the revolution, Riddler is putting in his bid to be the first one shot.
    I miss Stalin.


    I can't quite seem to remember - were you one of the people lamenting the lack of civil discourse? I mean so much so that you were going to leave the forums (forgetting the violent rhetoric for a moment)?

    Meanwhile... meninlove and christian remain silent. Like I've been suspecting - calls for "civil discourse" are really just calls to silence critics.
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    Jan 31, 2011 6:03 AM GMT
    jp, the humour isn't there because the topic is passionate to him.




    Riddler, you gave us what, 20 minutes?

    Now after half an hour I'm back from running a household.

    Patience young man.


    -Doug
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    Jan 31, 2011 8:15 AM GMT
    jprichva said
    riddler78 said
    jprichva saidComes the revolution, Riddler is putting in his bid to be the first one shot.
    I miss Stalin.


    I can't quite seem to remember - were you one of the people lamenting the lack of civil discourse? I mean so much so that you were going to leave the forums (forgetting the violent rhetoric for a moment)?

    Meanwhile... meninlove and christian remain silent. Like I've been suspecting - calls for "civil discourse" are really just calls to silence critics.

    Are you really this fucking stupid or do you simply lack any sense of humor?


    Yeah, cuz getting shot and Stalin are hilarious. Of course, on the other hand, you just seem like the type of moron that would like Stalin.
  • GQjock

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    Jan 31, 2011 10:30 AM GMT
    To a certain constitutional law prof: Pish-posh icon_biggrin.gif
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    Jan 31, 2011 11:01 AM GMT
    riddler78 said
    jprichva said
    riddler78 said
    jprichva saidComes the revolution, Riddler is putting in his bid to be the first one shot.
    I miss Stalin.


    I can't quite seem to remember - were you one of the people lamenting the lack of civil discourse? I mean so much so that you were going to leave the forums (forgetting the violent rhetoric for a moment)?

    Meanwhile... meninlove and christian remain silent. Like I've been suspecting - calls for "civil discourse" are really just calls to silence critics.

    Are you really this fucking stupid or do you simply lack any sense of humor?


    Yeah, cuz getting shot and Stalin are hilarious. Of course, on the other hand, you just seem like the type of moron that would like Stalin.


    Dude - It's not only a joke. It's an old joke (no offense, jp!).

    And I did reply upthread. icon_rolleyes.gif
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    Jan 31, 2011 11:44 AM GMT
    Getting back to the subject:
    So yes, the thesis
    "And so I also tell them that the corporation has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest."

    could be true, but that applies to stockholders only. What about sweatshops in foreign countries? Migrant workers with little bargaining power? How is their economic liberty maximized?

    How is economic liberty maximized without regulation of monopolies?

    And yes, the East India Company had Americans' economic liberty in mind, so much so that we revolted. Talk about rule of law when you can influence the law:

    http://en.wikipedia.org/wiki/East_India_CompanyThough the Company was becoming increasingly bold and ambitious in putting down resisting states, it was getting clearer that the Company was incapable of governing the vast expanse of the captured territories. The Bengal famine of 1770, in which one-third of the local population died, caused distress in Britain. Military and administrative costs mounted beyond control in British-administered regions in Bengal due to the ensuing drop in labour productivity. At the same time, there was commercial stagnation and trade depression throughout Europe. The directors of the company attempted to avert bankruptcy by appealing to Parliament for financial help. This led to the passing of the Tea Act in 1773, which gave the Company greater autonomy in running its trade in America, and allowed it an exemption from the tea tax which its colonial competitors were required to pay. When the American colonists, who included tea merchants, were told of the act, they tried to boycott it, claiming that, although the price had gone down on the tea when enforcing the act, it was a tax all the same, and the king should not have the right to just have a tax for no apparent reason. The arrival of tax-exempt Company tea, undercutting the local merchants, triggered the Boston Tea Party in the Province of Massachusetts Bay, one of the major events leading up to the American Revolution.
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    Jan 31, 2011 12:44 PM GMT
    q1w2e3 saidGetting back to the subject:
    So yes, the thesis
    "And so I also tell them that the corporation has proven to be a powerful engine for focusing the efforts of individuals to maintain economic liberty. Because tyranny is far more likely to come from the public sector than the private, those who for selfish reasons strive to maintain both a democratic capitalist society and, of particular relevance to the present argument, a substantial sphere of economic liberty therein serve the public interest."

    could be true, but that applies to stockholders only. What about sweatshops in foreign countries? Migrant workers with little bargaining power? How is their economic liberty maximized?

    How is economic liberty maximized without regulation of monopolies?

    And yes, the East India Company had Americans' economic liberty in mind, so much so that we revolted. Talk about rule of law when you can influence the law:

    http://en.wikipedia.org/wiki/East_India_CompanyThough the Company was becoming increasingly bold and ambitious in putting down resisting states, it was getting clearer that the Company was incapable of governing the vast expanse of the captured territories. The Bengal famine of 1770, in which one-third of the local population died, caused distress in Britain. Military and administrative costs mounted beyond control in British-administered regions in Bengal due to the ensuing drop in labour productivity. At the same time, there was commercial stagnation and trade depression throughout Europe. The directors of the company attempted to avert bankruptcy by appealing to Parliament for financial help. This led to the passing of the Tea Act in 1773, which gave the Company greater autonomy in running its trade in America, and allowed it an exemption from the tea tax which its colonial competitors were required to pay. When the American colonists, who included tea merchants, were told of the act, they tried to boycott it, claiming that, although the price had gone down on the tea when enforcing the act, it was a tax all the same, and the king should not have the right to just have a tax for no apparent reason. The arrival of tax-exempt Company tea, undercutting the local merchants, triggered the Boston Tea Party in the Province of Massachusetts Bay, one of the major events leading up to the American Revolution.



    The East India Trading Company was an instrument of the state - ie part of the public sector insofar as the argument the original author makes so I don't really understand your point here. There is however a fundamental difference here versus the general innovation of the corporation and the legal recognition corporations receive.
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    Jan 31, 2011 6:15 PM GMT
    No, the British East India Company was a private company with shareholders, and it had competition from another company going by a slightly different name. The political function of the company was only separated from its finances around the same time as the tea act.

    Of course, monopoly was not to be so easily vanquished:
    http://en.wikipedia.org/wiki/East_India_CompanyThe prosperity that the officers of the company enjoyed allowed them to return to their country and establish sprawling estates and businesses, and to obtain political power. The Company developed a lobby in the English parliament. Under pressure from ambitious tradesmen and former associates of the Company (pejoratively termed Interlopers by the Company), who wanted to establish private trading firms in India, a deregulating act was passed in 1694. This allowed any English firm to trade with India, unless specifically prohibited by act of parliament, thereby annulling the charter that was in force for almost 100 years. By an act that was passed in 1698, a new "parallel" East India Company (officially titled the English Company Trading to the East Indies) was floated under a state-backed indemnity of £2 million. The powerful stockholders of the old company quickly subscribed a sum of £315,000 in the new concern, and dominated the new body. The two companies wrestled with each other for some time, both in England and in India, for a dominant share of the trade. It quickly became evident that, in practice, the original Company faced scarcely any measurable competition. The companies merged in 1708, by a tripartite indenture involving both companies and the state. Under this arrangement, the merged company lent to the Treasury a sum of £3,200,000, in return for exclusive privileges for the next three years, after which the situation was to be reviewed. The amalgamated company became the United Company of Merchants of England Trading to the East Indies


    My point is that corporations promote economic liberty of its shareholders often at the expense of people who cannot be shareholders.