From: Barbara Lamar (altamiratexas@earthlink.net)
Date: Sun Jul 22 2001 - 13:30:37 MDT
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?
>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.
> 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.
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.
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).
> 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.
>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? If I send a not-so-good driver
out in my corporation's delivery truck, which happens to have badly worn
brake pads (due to the fact that my corporation's broke and doesn't have
enough money to pay for a brake job), and the truck smashes into your car,
totaling your car and severing your spinal chord at the neck, wouldn't you
want me to be responsible? Well, too bad. You can sue my corporation, but
it's broke. What a shame that you'll now be unable to pursue any gainful
employment and your savings together with your unemployment and medical
insurance don't provide enough to pay for the latest technology that would
have allowed you to rebuild your body. And there's no gov't assistance
available, so you linger on in a cheap nursing home, in constant pain from
oozing bed sores, reeking of urine until, mercifully, you die. Meanwhile,
I've started a new corporation to sell my self-improvement video that I call
"It's Your Choice."
> 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?
Barbara
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