Nyah Nyah Nyah, You Can’t Get ME-hee!

It is perfectly possible to be in favour of the free market while being hostile to the joint-stock corporation as the legal framework for the participants in that free market. Of course it suits certain interests to pretend that this is the same thing, as if the only alternative to a critique of corporate forms were a Soviet-style command economy.

Whereas people have combined to exploit resources from time immemorial, and not invariably as master and slave, one of the key innovations has been limited liability. This is quite a recent invention, whose function is to impede warranty claims and legal action in respect of negative externalities. Another is the cascade of dummy corporations, to the same ends as well as tax evasion, money-laundering and fraud. Neither invention is at all necessary to competition in a free market.

If I do something wrong and injurious as a private citizen, it is easy to punish me. If you do it, the same applies. But if you and I incorporate together and do the same wrong and injurious thing, it becomes much more difficult. Neither you nor I have done it, only the metaphysical union between us – an entity which, in Jeremy Bentham’s words, has neither bottom to be kicked nor soul to be damned. This does not apply to other unions: you cannot say that neither Brady nor Hindley killed any children, but that their relationship did.

In my jurisdiction it is cheap and easy to incorporate as a fictitious union between me, myself and I, with some patsy as co-director and all the shares in your own hands. This union can buy itself a Ferrari, fail to pay and then dissolve itself: bingo! Nothing to do with me, guv.

If you think this is a trivialisation, consider how in 1990 fires were set on the ferry Scandinavian Star, killing 159 passengers. A whole generation later, the full truth has yet to be ascertained, but it seems likely that the arson was motivated by insurance fraud. By whom is less obvious, however, as the ship changed ownership while actually at sea immediately prior to the fire, and it was long in doubt who owned her at the precise moment and so would ultimately benefit from the indemnity. Such a ridiculous situation ought to inspire to some hard thinking about the true purpose of corporate forms, even among those who believe in the setting of price by the intersection of supply and demand by independent private players.

Posted on April 28, 2009 at 11:01 by Hugo Grinebiter · Permalink
In: RESISTANCE IS FUTILE!, The Age Of Enron-cence

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