From: Mike Lorrey (mlorrey@datamann.com)
Date: Mon Jul 23 2001 - 09:53:06 MDT
Barbara Lamar wrote:
>
> Mike Lorrey wrote:
>
> >Generally, though I don't wish to 'ban' anything in a libertarian world.
>
> Not sure what you mean by 'ban,' but given that people naturally function in
> groups, and that large-scale projects require the joint effort of hundreds
> or thousands of people, would you not need, at a minimum, a constitution?
> Surely the constitution would allow laws that 'ban' certain types of
> behavior, such as stealing, murdering, fraudulently misrepresenting?
Since stealing and fraudulently misrepresenting are not crimes of
physical violence, they are financial and should not be considered, IMV,
to be crimes against the state. Also, in my view, I rarely see a case of
the family of a murder victim benefitting from the state's prosecution
of the murderer. They frequently wind up in serious financial straits,
which few of the 'victims funds' that some states have set up are
prepared to deal with. My personal preference for dealing with murderers
is that first the victims family is allowed to recoup as much as
possible from the murderer and his/her assets, and only then when their
financial needs have been satisfied as much as possible should
punishments like execution or life imprisonment be imposed. Thus, civil
judgements under common law should have precedence over the state's
interests. Why? Because the state is subservient to the people, it only
exists as a function of the delegation of the individual's power, and
thus the individual who has been violated (and their dependents) carries
greater legal precedence and interest in a case than the state does.
>
> >Any company may seek to purchase such liability protection from its
> >insurance provider.
>
> This sort of liability protection is very different from the liability
> protection granted by the state to corporate shareholders, limited partners,
> members of limited liability companies, etc. Presumably, the insurance
> company will pay the person wrongfully harmed, at least in some cases.
> Futhermore, in cases where the insured shareholders' carrier didn't provide
> adequate payment to the victim, the victim could seek recovery from the
> shareholders themselves.
> With state-granted limited liability, the victim is SOL. Even if he carries
> his own insurance, his premium rates will go up when he files a claim.
This is why I oppose the current state system. It should be the
corporations that insure themselves against their own bad behavior.
Their insurance company will be ascribed to a given PPL standard, and
engage with a given association of arbitrators to ajudicate that PPL
standard as it applies to the company's violations against others.
The problem is that the current state system has through its monopoly
status as sole lawgiver, abrogated its responsibility to act as this
insurance company.
>
> > Well, I'm not sure what it means to say that they "undermine free
> markets".
>
> Okay, here's an example: I decide to start a business selling a diet aid
> that consists of tapeworm eggs in a capsule. The diet is quite successful
> over the first few months it's used by the consumer, and my business, which
> I call Svelte Belt, does very well. I decide to bring in some investors so I
> can expand the business. Because shareholders in a corporation have no
> liability (beyond their investment in the corporation) for anything the
> corporation does, I'm able to persuade many people to invest in Svelte Belt,
> Inc. by showing them my p&l statement for the first year. They have no real
> need to examine my product closely, since all they stand to lose is their
> investment. It's another year before the earlier users of Svelte Belt,
> Inc.'s product begin experiencing health problems such as anemia. Several of
> the pregnant users find that their babies' health has been affected by the
> product. When they discover that Svelte Belt's product is actually tape worm
> eggs, they sue the company. But meanwhile, many of the shareholders of
> Svelte Belt have taken their gains on their Svelte Belt stock. Maybe I, as
> director and officer of Svelte Belt, Inc. will be held liable; but then,
> again, maybe not--it's pretty difficult to pierce the corporate veil.
Yes, it is, under the present state 'monopoly of force' system.
Originally, the purpose of corporate limited liability was to limit the
individual liability of each investor to their fair share of any
liability judgement (much as the listers of Lloyds share in liabilities
equally), rather than each being found fully (severally) liable, where
the claimants could seize the entire value of the judgement from each
and every investor.
Under the present system, the claimants don't get their money from the
investors directly, instead, the value of the investor's stock goes down
as the company's assets are drained by the imposition of the judgement
liability, and the company passes on the cost of the judgement to its
customers (who may or may not be the claimants who won the judgement in
the first place. The investors lose (temporarily) the value of their
stock from this liability, but are able to recoup this loss by fining
their customers for being so cheeky as to sue them.
It should properly function that each investor turns over the value of
their share of the judgement, in stock in the company, to the claimants,
and thus the assets of the company remain the same and the customers do
not pay the cost of the judgement.
>
> At the very least, this distorts the capital market, since absent limited
> liability, companies such as Svelte Belt would not attract as many
> investors. I'd predict that companies would tend to be smaller where
> shareholders were responsible for the activities of their corporations.
> Investors would want to personally know, or at least know about, the
> corporate decision makers; would want to know in detail about the products
> or services being sold.
Yes, but the real problem is not so much the liability issue, but the
legal finding of being severally liable. No investor wants to be ordered
to pay the full cost of a judgement, and making 100 investors each pay
100% of the cost is as unjust as making the customer pay for the
judgement they won against the company.
>
> Of course, far greater damage is done to the free market when corporations
> form "partnerships" with government. All too often that's what happens, but
> one could presumably prevent that sort of situation, at least for a while,
> by adhering to a properly drafted constitution. I say "at least for a while"
> because in practice, whenever a small group of people controls a significant
> per cent of the resources available to a population, the small group tends
> to either collude with a government or to function as a government itself.
> (by government, I mean a group of people exerting political power--that is
> to say, power via force or the threat thereof--over the population as a
> whole).
Frankly, I find the political action of any group not described in the
constitution as a just player to be inherently subversive. There is no
need for individuals to act politically as a group in any unit outside
the local, state, or national level unless they are trying to subvert
the constitution prominence as a contract between individuals and only
individuals. An individual acting behind a veil is not a fair Bayesian
actor.
>
> > Someone who has proven exceptional skills at managing capital should be
> given
> >control of that capital.
>
> This is one of the problems of the perpetual duration aspect of the
> corporation. The founder of a company may be very good at managing capital.
> Her successors may be incompetent scoundrels. Well, okay, you might say,
> then someone else who's a better manager will come along and compete with
> the first corporation and drive it out of business. This won't always
> happen, though, when the first corporation is already firmly established.
> This would be an example of an economic law you might call "those who have,
> get." The companies that prosper aren't always the best--in fact they
> usually aren't the best. Again, this problem is exacerbated by collusion
> between corporations and governments, but I don't believe such collusion is
> required in order for the "those who have, get" law to hold.
I think it is required. Why is it that corporations are able to get and
hold market share? Because the decision to buy is controlled by fewer
individuals than are in the whole group of buyers. When a corporation,
institution, or government is organized, the decision to buy a product
for all is delegated to few, and is therefore corruptible.
This applies to manufacturers buying resources, distributors buying
products from manufacturers, and retailers buying from distributors, as
well as the degree of control over the media.
When the liability actions of a corporations are excessively shielded by
the force of the state, corporations are much more free to accumulate
the assets which allow it to exert undue control over the market.
>
> >Furthermore, I have yet to see anyone, still,
> >contest my assertions about the individual's right to the product of
> >their labor being the basis of capital accumulation
>
> I don't see how this is relevant to whether or not corporations are
> desirable. Surely you'd want the individual's right to the product of their
> labor to be bounded at the point where the individual's use of the product
> of their labor is harmful to innocent people?
Of course. However, how many instances have you ever seen where the
government pays victims for their losses out of taxes or fines paid by
their victimizer? Never. Therefore, government doesn't work.
> > and that
> >confiscation of saved labor by the state is slavery.
>
> I take it you mean labor saved because of machinery, better methods of
> production or service provision, etc. I don't see how this, either, is
> relevant to whether or not corporations are desirable. Could you please
> elaborate?
No, that's not what I mean. If I work 40 hours a week, but my lifestyle
only consumes the value of 30 of those hours, I am able to save the
market value of 10 hours of work a week. In a year, I have 520 hours of
work saved, and in 30 years, I have 15,600 hours saved (1/4 of my entire
working life).
Under socialism, the presumption is that I owe those hours to society as
a debt to the past which not only brought me up by my 'village', but to
the increased productivity that the modern technology that 'society' has
developed that allowed me to have 10 surplus hours of work a week
(despite the fact that 'society' never invented anything), under the
presumption that a 'noble savage' would not have had that sort of
surplus labor (then how is it that we got to this point?), and that my
intelligence, creativity, and personal motives have absolutely nothing
to do with it.
If it is not obvious, I entirely reject this claim of 'society' being
the agent of my success, and therefore deny it the claim to a right to
my surplus labor. I demonstrated by my fitness the ability to generate
surplus labor. If it were 'society' that created that surplus, it should
be able to create that surplus equally with all workers. Since it does
not, then it is evident that society is not the agency of my surplus
production, and therefore it has no right to it.
Those who demonstrate the ability to best conserve their surplus labor
should be able to benefit society the greatest by being given sole
responsibility for that saved labor. An investment instrument is a tool,
as much as any hammer or shovel. When a laborer buys a hammer or shovel
for their personal use, they are investing in greater productivity, in
capital, and they are entitled to the product of that increased
productivity, because they invested with their own sweat to acquire it.
The real question to ask is: does a person have the right to decide how
their surplus labor assets are to be used after their death, and to what
degree? I ask: How is enslaving the labor of a person while they are
alive any different from enslaving their labor after their death? A free
person has the right to decide how altruistic they wish to be, whether
to spread their wealth far and wide, or concentrate it in few hands. How
is distributing 100% of your saved labor equally as gifts to 100% of
society morally superior to distribution of it to only one person? It is
your free choice either way, so how can one choice be morally superior
than another?
Do we judge the choice by which one creates the greatest good for
society, or for all members of society, then? How do we judge what the
greatest good IS? If we do it in quantitative terms, it can be
quantitatively shown that placing wealth in the hands of those most able
to responsibly manage it produces the greatest good for all, because it
can generate greater productivity as an instrument of investment in
capital goods than in being consumed in perishable consumer items, and
those who do not have tend to have demonstrated their inability to
responsibly invest in capital for greater future productivity. On this
basis, capitalism is morally superior to socialism.
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