[Editors Note: This essay is part of BHL’s Symposium on Left-Libertarianism. Click on the link to see the other essays.]
In an important essay, “Corporations versus the Market, or Whip Conflation Now,” Roderick Long has identified a fallacy committed by both defenders and critics of libertarianism. Those who commit this fallacy identify too closely the institutions of a libertarian society with those of capitalism as it now exists. In doing so, they are blind to the manifold ways corporations, privileged by the state, distort a genuinely free market. Because of this distortion, left libertarians prefer to call what they want a “freed” market rather than a “free” market. (It should be noted, though, that a freed market is a species of free market.  The left libertarians’ preference for the term “freed” hardly suggests that they would not also support a free market that arose without ever suffering from the distortions they deplore.)

Long’s point is a good one, but I think that he and other left libertarians sometimes go too far with it. I should like to distinguish two types of anti-conflation, weak and strong.  Weak anti-conflation is the view that it is wrong to assume that the institutions of a libertarian society will resemble those that now exist under capitalism. We should not assume, e.g., that large, “hierarchical” corporations will be a prominent feature of the freed market. Strong anti-conflation goes further. Its advocates say that certain institutions that now exist will not be present, or at least won’t be present to the same extent, in the freed market. In brief, the weak anti-conflationist says, “Don’t assume that things will be the same in the freed market”; the strong anti-conflationist says, “We can assume that things will be different in the freed market.”

Weak anti-conflation seems to me a correct position, and strong anti-conflationists are clearly sometimes right. We can say, e.g., that state subsidies to businesses would not exist in a freed market: we are not confined to the anemic claim that we don’t know whether such payments would exist in a genuinely free market. Can we say the same about the claim that hierarchical corporations would be largely replaced in a freed market by worker-owned, non-hierarchical firms? I do not think so.

The argument that hierarchical corporations feature only in distorted, not genuinely free, markets goes something like this. People are strongly averse to taking orders from others and having little or no say about the conditions under which they work. If nevertheless many workers today have to labor in Dilbert-like settings, this is not the result of truly voluntary choices on their part. To the contrary, large corporations privileged by the state have substantially more bargaining power than workers. Faced with this disparity of bargaining power, workers have only poor options. If they do not accept the bad terms offered by their corporate employers, they may not be able to get a job at all. The situation is made worse by the fact that the weak bargaining position of the workers is itself the result of corporate and state acts of dispossession against workers and small property owners, both in the past and the present.

I don’t think that wages are determined by bargaining power in the way that left libertarians suggest, but this is not the issue that will be pursued here. Rather, the question I want to consider is this: Suppose that a genuinely free market exists. Would most laborers work in worker-owned firms, such as cooperatives, or be self-employed, rather than work in companies that they do not own?

One reason to think so is that people don’t like to take orders from others.  Would workers not then prefer firms in which they themselves decide how the firm is to be run, rather than be subject to the whims of a boss?  Here, though, there is a problem. It does seem entirely plausible that people dislike taking orders from others; in a worker-owned firm, though, each worker still has to take orders from others.  The group of worker-owners makes the decisions, and individual workers must sometimes still do what they don’t want, unless what they want always is supported by the group’s decision procedure.

True enough, each worker has a say in setting policy; but to those who dislike taking orders, how much solace does this provide? The issue is analogous to that of citizens in a democracy: the fact that one has a vote hardly implies that one is deciding in a significant way what is to be done. Against this, of course, workers in a firm are likely to form a vastly smaller group than do the citizens of a modern state, so each worker will have more of a say; but it remains true that each worker counts as but one among many. This problem can be avoided in firms that consist of one worker only; but to expect an economy to arise in which most people are self-employed is surely an example of what Marx called “duodecimo editions of the New Jerusalem.”

Some might be inclined here to adduce workers’ solidarity: would it not be likely that those who decided to join together in a firm would have a similar sense of the policy the firm ought to follow? I think this suggestion underestimates the propensity to conflict among members of small groups.

Perhaps, though, there is more to the complaint against hierarchy than has so far been considered. People might dislike, besides having to follow the decisions of someone else, the fact that some particular person or group stands over them and is in a position to tell them what to do. In a worker-owned firm, no one occupies this superior role. If you lose a policy decision, then you have been outvoted by equals.

The strength of such a preference for equality of status is hard to estimate, but there is something on the other side that needs to be taken into account. How well the owner of a business does depends on the success of the firm. Many firms fail, and in the case the owner will receive nothing and may have to make up the firm’s debts from his own resources. Many people prefer to receive a fixed salary rather than to leave their fate to the market’s verdict. As an example, most academics receive a fixed salary. One can readily imagine another system, e.g., one in which professors’ salaries were entirely dependent on fees from students they were able to attract. European universities in the past sometimes operated, in whole or part, on this plan. It is highly doubtful, though, whether most academics today would prefer to entrust their financial fate to student choices in this way.  If they want a fixed salary, then the risks of financial failure they decline to assume must be passed on to others: these risks cannot be conjured away. More generally, workers, even in a freed market, may prefer to leave the risks of decisions that will result in profit or loss to others.  It seems perfectly sensible for workers to balance their desire to run things themselves against the costs of assuming the risks of loss and to find the latter consideration the weightier.

I do not say that this suffices to show that worker-owned firms would not prevail in a truly free market. My theme is more modest: we should not too readily assume that the institutions of a free market would overthrow the hierarchical structures that left libertarians oppose.  Left libertarians who are sure that a freed market would sweep away hierarchy and other features of the present order that they dislike should remember the words of Talleyrand: Surtout, pas trop de zèle.

  • GeorgeNYC

    At their core, corporations are legal entities that benefit from the government subsidy of limited liability. This allows for “liquidity” in their shares because a change of ownership does not impact the credit rating of the company by eliminating the assets of a particularly wealthy owner from consideration. A hierarchy has grown up around this legal entity to protect the interests of the owners/shareholders (particularly so in publicly traded companies).

    Once the liability limitation is taken away (which it should be under a libertarian society) the organizational dynamics will be completely different as owners no longer have liability limited to their investments and thus would of necessity need to take a much more aggressive role in the organization or risk their wealth being taken away by poor management.

    This would have a direct impact on a company’s willingness to engage in activities that create externalities such as pollution where those owners could face personal liability for the actions of the organization. In theory, this would actually allow the “freed” market to price in such externalities rather than now allowing companies to walk away from them should they turn out to be worse than expected.

    • Absolutely. That is the key. In addition large corporations difficulty in raising funds in a non LLC environment would put them on even footing with smaller companies and individuals, giving those entities a better chance to compete.

      Don’t we all think it’s a bit obscene that small mom/pop shops have trouble getting financing for obviously good projects while at the same time entities like Enron, MCI/WoldCom and Groupon are able to raise HUGE sums of money on wall street in spite of a bad business model.

      • martinbrock

        In freed markets, I expect some communities to rule out limited liability corporations, but I also expect some communities to rule them in and even to permit persons outside of the community to own shares of an LLC within the community.

        A strong anti-conflationist says that libertopia simply rules out LLCs, but I doubt that, because I see some benefits to LLCs despite the disadvantages that you discuss. LLCs permit corporations to attract investors as you say, so they permit a single corporate structure to govern more resources and thus achieve economies of scale.

        If you don’t like LLCs, you avoid them. You don’t buy their shares or their products, and you don’t accept employment with them. The same goes for other communities generally, because you have no right to anything from members of another community, including its corporations, except by the rules of the other community. The rules of your own community entitle you to nothing from another community.

        • Mick Price

          The question is how do you justify not paying someone who has a legitimate tort/damages claim? If you’re one of the owners of the enterprise that caused the damage you’re liable and putting LLC at the end of the company name doesn’t change that.

          Creditors who chose to lend the firm cash after being told the terms aren’t a problem. Either they insure the risk, voluntarily assume it or they walk away.

          • martinbrock

            I don’t justify anything, beyond self-ownership and non-aggression, that doesn’t involve me directly. I might subjectively feel obliged to compensate you for a tort if I profit from ownership in a corporation that harms you, but I don’t impose this subjective impression on others. That I’m willing to compensate you in this scenario is not equivalent to my willingness to force others to compensate you similarly. If you want an assurance of compensation in this scenario, join a community of others who share our subjective values.

          • Mick Price

            If you agreed to act in concert you agreed to responsibility for the results. Live up to your commitments.

          • martinbrock

            I can keep my agreements without imposing my sense of my responsibility on others. If you want share holders in a corporation to accept responsibility for the corporation’s liabilities, beyond the cost of their shares, don’t deal with limited liability corporations. Libertarianism does not promise to enforce every right that you think you have.

          • Mick Price

            “If you want share holders in a corporation to accept responsibility for the corporation’s liabilities, beyond the cost of their shares, don’t deal with limited liability corporations. ”
            Which is valid for contracted debts, but not for debts resulting from damage caused by negligence or malice by the company.

          • martinbrock

            The question is: who defines “damage” and “negligence or malice” and the corresponding debts? You? The judge of your choice? Some authority must establish these standards, and as a libertarian, I want this authority vested in voluntary communities, so if you want to avoid interacting with limited liability corporations, you should avoid communities constituting them. If you think you can tell everyone else on Earth when they owe you a debt and how much they owe, expect a lot of frustration … and don’t call yourself a libertarian.

          • Mick Price

            “The question is: who defines “damage” and “negligence or malice” and the corresponding debts? You? The judge of your choice?”
            Well when you agreed to be part of the corporation you agreed to abide by their strategy for dealing with damages claims, just like you agreed to their strategy on labor, materials sourcing etc.

          • martinbrock

            When I buy shares of an LLC, I agree to liability limited to the loss of the value of my shares. That’s what “Limited Liability Corporation” means”. The problem is that you don’t like this agreement, so you want to impose other terms on my agreement with the corporation insofar as you interact with it. I can only tell you to interact carefully with persons with whom you have no agreements, because these persons may not accept your terms.

            If I lend money to a corporation that subsequently harms you, do I owe you compensation if the corporation cannot pay the compensation you expect and also service its debt to me? What’s the difference? I give the corporation money in both cases, and in both cases, I give the money with an explicit understanding that I do not owe you this compensation. When may you declare unilaterally that I owe you something?

          • Mick Price

            “I can only tell you to interact carefully with persons with whom you have no agreements, because these persons may not accept your terms.'”
            But as I didn’t choose to deal with people who commited a tort against me.

            “What’s the difference?”
            Creditors aren’t owners.

          • martinbrock

            And a shareholder in an LLC doesn’t choose to accept unlimited liability. You’re telling him, after he signs a contract, that he accepts liability that the contract explicitly states that he doesn’t accept.

            “Shareholder in an LLC” doesn’t mean what you want “owner” to mean either, so you haven’t addressed the question.

    • RickDiMare

      Agreed, but don’t forget the corporate privilege of eternal life. Over the years, I’ve come to see this as often more substantial than limited liability. Natural persons are always subject to a natural life cycle and a learning curve, whereas corporate entities are continually honing their skills and legal expertise. No natural person can compete with this.

      • TracyW

        Thus explaining why Bill Gates went bust when he and his start-up friends went up against IBM.

        • RickDiMare

          Bill Gates, in his capacity as a natural person, didn’t really go up against IBM. If he had, he likely would have fizzled out a long time ago and IBM would now own his ideas. If I recall correctly, Bill Gates’ father was a lawyer who helped his son compete with IBM as a corporate, artificial person (officer/director of Microsoft, Inc.).

          Essentially, corporations are miniature governments, or satelites/branches of the government. Then, we designate between two broad categories of corporations, public and private, where so-called “private” corporations mean we will allow so-called “passive investors” (an oxymoron to me) to own shares … and then also often allow upper management to earn exorbitant salaries that would not ordinarily be allowed in fully public corporations.

          • TracyW

            Your argument was that corporation’s eternal lives mean that they are always honing their skills and legal expertise, which no natural person can compete with.

            Now you say that Bill Gates + the other people in his start up managed to compete with IBM because Bill Gates’ dad helped. I don’t see how this argument is meant to make your first hypothesis any more believable.

            As for allowing things at private corporations, it’s the business of the owners. If they want to pay their upper management exorbitant salaries it comes out of their pockets. If they want to be passive about their investments, then they bear the costs, and benefits, of that. I don’t think there’s any point in trying to stop people from making stupid decisions in those areas.

          • RickDiMare

            The point I was trying to make about Bill Gates is that he would not have been able to compete with IBM if he remained a sole proprietor “natural person.” Also, the eternal life feature of corporate “personhood,” particularly regarding banking and financial services corporations, allows for a never-ending honing or updating of contracts, to the point where today it’s very difficult for them to lose money.

            Regarding excessive salaries to corporate officers, that used to be illegal and the IRS would declare the excess to be a dividend owed to the shareholders. I don’t know when that changed. Probably in the Reagan era.

            Also, to my point about the term “passive investors” being an oxymoron, investing is a conscious activity. A shareholder really has no moral or natural right to financially support a profiteering corporation and then disclaim liability when the privately-owned corporation is found to be abusive or illegal. Here, it may help my argument to mention that the word “pirate” is a bastardization of the word “private” or “privateer,” which were legal-fiction entities backed (and indemnified) by monarchies and investors. Often, the investor knew or suspected that the privateer was engaging in heinous methods to gain profit, but was willfully blind to it. Also, conveniently, if the pirate ship went down and never returned, the investors were not liable.

          • TracyW

            And the point I was making was that if it’s very cheap to incorporate, then who cares if corporations have an advantage over natural persons? I own a NZ limited liability company, it took me about NZ$60 and an hour to set it up.

            It may be very difficult for banks and financial services firm to lose money, but they appear to be disproportionately good at surmounting those difficulties. Banks and financial institutes dominate this list of large sums of money lost trading (admittedly a definition of losing money that excludes much government activity).

            As for using a corporate firm to disclaim liability from illegal acts, IANAL but based on search results for the term “piercing the corporate veil”, courts are already quite capable of making shareholders liable when they think shareholders are using the corporation as a sham to facilitate fraud or to commit criminal acts against third parties.

            I suspect that any difficulties courts had in the past with taking monarchs to account for supporting privateers had to do with the monarch being the monarch.

            As for abusive acts that are not illegal, under the rule of law shouldn’t these not be punished anyway, regardless of whether they’re being done by individuals or corporations?

          • RickDiMare

            It’s cheap to form a corporation in the U.S. also, and it can be done without a lawyer, but corporate activity is the bread and butter for many lawyers because here corporations are not allowed to represent themselves in court (nor in front of the IRS, if I’m not mistaken), not to mention the complexities of operating in a corporate capacity.

            But as far as who cares about the proliferation of corporate advantage and the monopolization of resources and economic opportunity that usually follows, I think libertarians interested in self-ownership should care. Corporate legal fictions are the antithesis of self-ownership. They are pure legal figments of the state’s imagination (but I’m mostly concerned about the proliferation of privately-owned corporations because IMO fully-public corporations serve legitimate human needs, such as in the formation of cities, towns, states, nonprofits, etc.).

          • TracyW

            Based on what you’ve presented here, libertarians would be better off caring about whether the Enterprise could beat the Death Star.

          • TracyW

            You provide very few details about excessive salaries, I suspect from your mention of the IRS however that this is about people trying to avoid tax.

          • RickDiMare

            Here’s one article I found online after doing a quick search for “excessive salaries” and “constructive dividends”: http://www.familylawyerspittsburgh.com/executive-compensation-excessive-salary-or-disguised-dividend/

          • TracyW

            As I thought, tax avoidance. To quote from the article you linked to:

            “But in a closely held corporation, the owners might decide to take their dividends in the form of salary in order to beat the corporate income tax.”

          • RickDiMare

            Yes, but I think in larger corporations with lots of stockholders excessive salaries tend to cheat the shareholders, too.

          • TracyW

            If so then it’s an excellent reason to not invest in those firms, and one I would expect libertarians to expect people to judge for themselves.

          • Every dollar invested requires due diligence, so there are no truly passive investors.

            I would say there are no passive consumers, either.

            There are things I’d rather not be a party to, but of course avoiding this is easier said than done…

          • RickDiMare

            “I would say there are no passive consumers, either.”

            Agreed. That’s where the real voting happens. How we interact with banks, markets and the monetary system reveals what we really want, not how we vote on election day, which is relatively meaningless.

          • I refuse to call it voting, since some clearly have more votes than others. If anything it’s why a market economy is in fact a command economy.

          • Mick Price

            Privateers weren’t legal fiction anything. They were real people who had a real license to steal real stuff. They were allowed to get away with heinous things not because of any corporate form but because there was a war on and attacking the other sides merchantmen was considered a legitimate way to persue it.

    • TracyW

      You forget that bad luck can cause business ventures to go bust, as well as poor management.

      You also assume that investors are good at identifying poor management, but having money to invest is in the end a matter of spending less than you earn. Why should someone who is a good manager of household income (or has cheap tastes) be also good at picking good managers of businesses?

      Without limited liability, we would see much less capital-intensive investments as it would be far harder to raise capital from a diverse range of investors, which would impact everyone as consumers. Furthermore, it would be far harder for individuals to diversify our savings outside areas we already know well (be they because they’re local, or in the same line of business we are in), but as our basic jobs tend to be in areas we know well, we therefore would be at risk of losing both our source of earnings and our savings at the same time.


      I believe you are wrong on two grounds. First, limited liability simply codifies in law the correct moral position. There is no justification with sticking passive investors, who take no active part in the management of the enterprise, with personal liability for the fraud or gross mismanagement senior executives. Contrary to what you claim, 99% of ordinary investors do not have the time or interest to micro-manage their investments. They have to get up and go to work every day, raise children, etc. And, forcing micro-management on them would lead to organizational chaos, gross inefficiency, and as TracyW points out, insufficient capital. Thus, there is no governmental “subsidy” because limited liability is the correct outcome from any plausible ethical perspective.

      Second, corporations could achieve limited liability through contract. They would require everyone doing business with them to sign an agreement or otherwise acknowledge that the corporation’s liability is limited to the capital it has on its books, i.e. no going after the wealth of passive investors. So, again, no “subsidy,” just the codification of what corporations could achieve on their own, although this would obviously be less efficient and more costly without statutory help.

      • TonyFressola1950

        Joint owners of an enterprise may certainly limit their liability debt holders and business associates through contract. The more interesting question is the extent of liability joint owners of an enterprise should have for tort damages to unrelated persons resulting from actions of the enterprise. That liability cannot be limited by contract, since those unrelated persons have no contractual relationship with either the enterprise or its owners.

    • j r

      Once the liability limitation is taken away (which it should be under a libertarian society) the organizational dynamics will be completely different…

      This is the perfect example of where strong conflation goes awry. I see no reason why a libertarian society should do away with the limited liability corporation, but even if it did then I assume that individuals would still retain a very wide ability to enter into contracts with one another. If that is the case, there is every reason to assume that lots of people will want to play the role of passive investor with limited say in the day-to-day operations and limited liability to any debts and torts that the company might incur. Not to mention, lots of businesses will wish to raise capital by selling equity, but don’t want to deal with thousands of very involved new owners.

      That being the case, the LLC will simply assert itself through contracts as opposed to through the law. As a libertarian, that may be preferential, but you’ve simply gotten to the same destination by a different route.

    • RickDiMare

      The government-sponsored corporate privilege is a form of very cheap liability insurance, and often funds risky or reckless activities that are unacceptable to private insurers. At the very least, corporations should pay an income tax surcharge under Flint v. Stone Tracy Co. (1911) so that businesses not incorporated can compete, but remarkably, we’ve been duped into believing that corporate privilege holders are job creators, who should not be taxed, as though they were natural persons at common law.

  • Steven Horwitz

    David’s strong/weak distinction here is excellent and is a much more concise way of getting at the point I was making in my contribution earlier this week.

    • Sean II

      I wonder if there might be a statistical common ground between the two positions.

      What if the strong anti-conflationists are right, and large numbers of people really would chose self-employment in a freed market? But what if they are also wrong, and very few people would choose coops, worker-owned firms, kibbutzim, etc?

      What you’d have is a bunch of corporations, similar enough to those we have now, but coexisting with a newly massive number of sole proprietorships.

      Taking them all together, the AVERAGE firm size would definitely go down, under the statistical weight of so many one-person firms, but you wouldn’t necessarily see a whole bunch of cooperatives, quarrelsome partnerships, etc.

      Now, if only we WEREN’T a thousand years removed from the kind of political experiment that might settle this question empirically.

      • martinbrock

        You mean to say, “But what if strong anti-conflationists who are not syndicalists are also right, and very few people would choose coops, worker-owned firms, kibbutzim, etc?” A left-libertarian need not be be a syndicalist.

        A libertarian experiment doesn’t require a universal libertopia, only a random sample, and a self-selected sample seems better than nothing

    • jmafc

      Actually, I was more agreeable to your post than David’s. I think David ought to consider what happens in a free/open source software project. For example, with respect to people being “outvoted by equals” see http://producingoss.com/en/forks.html

  • martinbrock

    Weak anti-conflation seems to me a correct position, …

    I agree.

    … and strong anti-conflationists are clearly sometimes right.

    I’m not sure, but I’m also an obsessive-compulsive-agnostic.

    … we are not confined to the anemic claim that we don’t know whether such payments would exist in a genuinely free market.

    Holbo seems to say that you shouldn’t even assume a “genuinely free market”, because to assume it is to subject yourself to its enemies. So you should just stop assuming it and get with the statutory program. Do you agree, either that Holbo says this or that he’s right to say it?

    Can we say the same about the claim that hierarchical corporations would be largely replaced in a freed market by worker-owned, non-hierarchical firms?

    We need to parse “worker-owned” and “non-hierarchical” here.

    An intentional community is “member owned” in some sense, even if the rules of this community permit individuals to own resources “individually” within the community and even to take resources from the community if they choose to leave it. A corporation’s articles could stipulate this division of corporately owned resources, and actually existing corporations have “golden parachute” arrangements with top officers in the hierarchy of corporate authority.

    Left-libertarians only argue that few freed communities would incorporate this way. We don’t say that communities will not be hierarchical or even absolutely monarchical. We only say that people may leave such a community if they don’t like it, and some of us (including me) suppose that few people will remain long in absolute monarchies. In other words, I’m a weak conflationist.

    I once accepted the “libertarian-syndicalist” label, but I now try to avoid labels that don’t describe my thinking, according to Wikipedia or plato.stanford.edu or http://www.iep.utm.edu, and this habit makes labeling myself extremely difficult. [Needless to say, I’m the quintessential “left-libertarian” for the sake of my discussion here. That’s the price I demand for accepting the label, but I’m not unwilling to change my left-libertarian ideals.]

    People are strongly averse to taking orders from others …

    Some people are, and some people aren’t, and the ones who are often fly a “libertarian” banner. I’m actually very submissive myself, if sometimes passive-aggressive (but never very aggressive in deed). I heard “turn the other cheek” in Sunday School and actually took the idea seriously. I’m older now, and I still can’t get it out of my head. I have my mother to thank for this, even though I thought her a terrible hypocrite in my adolescence.

    … individual workers must sometimes still do what they don’t want, unless what they want always is supported by the group’s decision procedure.

    Right, but I prefer not to think that workers do what they don’t want. They rather decide, after reflection, that they’re still committed to the ideals of the community they joined, even if they lapsed into some other ideal (or no ideal) for a moment. They do what they want in spite of a never ending crisis of faith. In unfreed markets, I have this experience on a daily basis, and I expect to have it frequently in freed markets as well. Freeing markets doesn’t repeal human nature.

    … to those who dislike taking orders, how much solace does this provide?

    Some people seem doomed to unhappiness. The Kingdom of God seems not to be within them. We can’t free people from themselves, but I like to think that no one is doomed ultimately. I’m a universalist even while eschewing practically all universal standards of propriety.

    Do you agree therefore that I’m a weak conflationist?

    … would it not be likely that those who decided to join together in a firm would have a similar sense of the policy the firm ought to follow?

    It’s not only likely. It’s the essence of left-liberarianism.

    If you lose a policy decision, then you have been outvoted by equals.

    I don’t strictly agree here, but the difference seems a matter of semantics. Some people are happier in a subordinate rule. They don’t want to be equal to a superior. They want to be told what to do. These people live in left-libertopia too, and we want them to have what they want.

    … one in which professors’ salaries were entirely dependent on fees from students they were able to attract.

    Hear, hear.

    It is highly doubtful, though, whether most academics today would prefer to entrust their financial fate to student choices in this way.

    In a freed markets, students have a louder voice in this decision. I have three kids in college right now, professor.

    I understand your point though. Academics entrust their fate to students in a freed market, but they need not do so individually.

  • Sean II

    Since I forgot to mention this elsewhere, I’ll just chuck it in now:

    In the pantheon of asshole bosses, there is one figure that looms more terrifyingly than all the others. He is arbitrary, petty, sadistic, condescending, spoiled, prejudiced, ignorant, and relentlessly elitist.

    He is called “The Customer”. Many of the evils management inflicts on its employees, are in fact acts of cruelty originated by The Customer. (For a graphic illustration of this, watch the scene where Judge Reinhold gets fired in “Fast Times at Ridgemont High”.)

    At any rate, I’m pretty sure a fully freed market would only give this particular variety of asshole boss even more power than he has today. Indeed, we may all end up longing for the good old days, when we had an intermediary standing between us and him.

    • martinbrock

      The Customer is everything you say and more, but I gotta love him. He’s me.

  • RickDiMare

    After the 1911 Flint v. Stone Tracy decision, and before the 16th Amendment was ratified in 1913, it was clear that corporate artificial/legal persons held a legal status that was inferior to that of natural persons, even inferior to the legal status of employers who were not incorporated.

    However, after 1913 the conflation begins.

    Now, after the 16th Amendment, in addition to Congress being able to tax recipients of rental income, interest income, dividend income, and capital gain income, unincorporated employers can also be taxed on gains from hiring labor. But tax attorneys seem to have looked the other way (or conspired with corporate interests to do so) in that this new 16th Amendment income tax should have been levied on corporate employers *IN ADDITION* to the corporate privilege tax authorized in 1911.

    But wait. It gets worse.

    In 1935 the Social Security so-called “trust fund” gets started, but the Supreme Court later rules in Helvering v. Davis (1937) that government-forced savings/retirement plans based on employee wages are really taxes on income. (However, the Court doesn’t completely show its hand by revealing the tax to be on the worker’s incoming receipt of currency substitutes. The Court only reveals the tax to be a “special income tax.”)

    But here again tax attorneys look the other way because employers are almost always recipients of currency substitutes, just like the workers they hire. In short, after 1937 incorporated employers should be paying three separate income taxes to regulate their behavior, while unincorporated employers should be paying two.

    If this is ever understood, technically by tax attorneys, and generally by the American public, the real cause of inordinate corporate power would readily become apparent.

    • martinbrock

      You’re saying that a corporation owes the personal income tax?

      • RickDiMare

        Not really. I’m saying that in order for Congress to properly regulate the corporation, and to prevent the corporation from drowning out other business entities, three separate income taxes, with three separate tax rates, should be reported on the corporation’s annual return:

        (1) an income tax on the substantial (and unnatural, I might add) benefits enjoyed by operating in a corporate, privileged capacity under Flint v. Stone Tracy (1911);

        (2) an income tax under the 16th Amendment to capture a portion of the economic rent or natural resource yield that the corporation derives, exploits or extracts from land, ocean, atmosphere, etc.

        (3) a currency-regulating income tax on the use of (non-U.S. coin-based) currency substitutes under Helvering v. Davis (1937), which tax is presently thought to only apply to a natural person’s wages.

        • martinbrock

          I don’t know about (1) and (3), but the 16th Amendment doesn’t seem to limit Congress to taxing incomes as you describe. On its face, it seems to empower Congress to take every dime that any U.S. subject receives in any way and keep it all in D.C. I have to wonder how that happened, but the explicit language of the amendment says little else.

          • RickDiMare

            You’re not alone. Lawyers haven’t been looking at this either, and they’re certainly not taught it in law school.

            Believe it or not, the 16th Amendment is the libertarians friend, though you’d never know it from all the misinformation we’ve been fed. The 16th was necessary only to authorize a particular form of income taxes, those derived from the property sources (land, labor, capital).

            The (1) and (3) you mentioned don’t even require support from the 16th Amendment because they involve taxes on income derived from corporate privilege and currency regulation, which are not property sources.

  • Itsthecountereconomystupid

    In your statement about people wanting the security of a wage, you take for granted that a genuinely free market will be as unpredictable as current capitalism and also that it will be as hard to find a job as it is now. Left Libertarians tend to think this incentive will not exist because in a geniunly free market, people will not need to cling to their jobs for there will be so many oppurtunities and the cost of living will be so low that temporary unemployment wont matter as much as it does now

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  • David Johnson

    “Would workers not then prefer firms in which they themselves decide how
    the firm is to be run, rather than be subject to the whims of a boss?”

    Of course not! We only need to look around us to see that this won’t happen under the Libertopia. Today workers avoid company meetings if they can. It doesn’t matter if they work for a market distorting corporation, or a small private mom-n-pop with ten employees. They hate those meetings. If there were no pressure to attend those meetings most would not go.

  • Dan Dennis

    The original post is right. There may well still be big corporations in a Left Libertarian state.

    Running a business, understanding the market, judging where to invest etc are complex skills. You cannot expect a skilled factory worker to be good at those things too. The law of Division of Labour still applies.

    Plus, worker managed firms will tend to be reluctant to shed labour so will lose competitiveness against ruthless corporations.

    Plus there are many barriers to entry to markets – from capital investment to consumer recognition – that favour established companies.

    One thing I am curious about – do Left Libertarians think that Left Libertarian governments should (like current western governments) prevent the formations of monopolies? Intervening in markets (e.g. preventing a merger of two private companies) is not a very libertarian thing to do – yet the alternative is to have an erosion of the free-market….

    • andycleary

      “Left libertarian governments”: lolwhut? LLs are against the state.

  • SimpleMachine88

    Look, the real point you want to make here is that owning a share in your employer exacerbates your risk. If your employer goes busto, you lose your job AND your savings. Instead you want to be hedged against risk, with your assets as far from your field of employment as possible.

    It also LIMITS your bargaining power, which is precisely why firms try to keep employee savings as stock in the company, and why companies try to pay with pension instead of wages. It stops you from looking for a better job, because you don’t get the money you’ve earned if you do.

    This whole employee owned business thing is nonsense from a bunch of early twentieth century ninnies. What the employees really want to own is skills, the value of which is higher the more tradeable they are. That means money up front, keeping your health care, savings, and retirement the hell away from your employer, and a good economy which means many different firms competing over your skills.

  • In a libertarian society, people’s choices are still constrained by the choices available to them, apart from any preferences they might have about the ways in which their range of alternatives might have been different from the alternatives they actually have. And in the economic sphere of production and exchange, the choices available to a person depend almost entirely on the outcomes of choices of other people.

    So while it is interesting to approach these question in an institutional vacuum with a moral view from nowhere, and ask about whether people would uniformly prefer to work in non-hierarchical environments, or some might prefer hierarchical environments, that doesn’t strike me as the most important question. A more important question is what economic institutions would be likely to evolve in a libertarian society. My hypothesis is that over time, as stronger competitors out-compete weak ones, and property flows from the weak to the strong, we would likely see an increasing concentration of wealth – including capital resources – in a few hands. That means that the institutional shape and orientation of the organized productive enterprises that would then exist would be determined by those who own the capital resources from which those enterprises are constructed. Those who then seek whatever level of general prosperity is available in the society by exchanging work for wages would find that their choices of working conditions are severely limited by whatever arrangements have been provided by the ownership elite. I think we can assume that these conditions would be hierarchical, because people who own and control things tend to order and direct them in such a way as to satisfy their own interests, not the interests of many others whom they barely know and with whom they have only an economic relationship.

    People who prefer other arrangements might be able to choose a few other arrangements in which they are more free to direct themselves, but since they own no capital those alternatives are likely to be much less appealing from an economic point of view. Like Bartleby the Scrivener, they can always say, “I would prefer not to,” but they aren’t likely to get anything other than an inward spiritual reward for their resistance.

    Libertarians tend to believe that without a system of coercive state privileges, the institutions of production and exchange would tend to evolve toward thriving competition, diversity, easy access to markets, and a proliferation of options. But where is the evidence for this? After all, states themselves are very frequently hierarchical institutions, but states did not generally achieve their power and assemble those hierarchies because they were granted privileges by other states. The states that dot the world now are the current winners of a competitive struggle for power, and evolved naturally out of the smaller kingdoms, tribes, clans and fiefdoms of the past. Alliances with, patronage by or subordination to other states in that competition are opportunistic and fleeting. Why assume that competition among firms in the libertarian dream world of limited state power and free competition would result in anything different?

    • Sean II

      Dan, If I might try to persuade you to reconsider two points on which your concerns seem to rest:

      1) There is no need to envision a scenario where “stronger” competitors beat out “weaker” ones, until wealth concentration results. This is because there really is no such thing as “merit” or universal business acumen or strength at competition or anything like that. The market doesn’t actually reward stronger competitors, it simply rewards successful risks (and punishes everything else). The ability to compete is something akin to a minimum necessary condition, but after that, it all comes down to risk.

      Some of this can be seen empirically today, just by taking an easy case. Steven Spielberg has about as much competitive advantage as anyone could in any industry. Yet how many flops is he from losing his investors 250 milllion dollars? One. And what does it take for him to produce a flop? All it takes is people deciding not to like one of his products. Do they need a reason to decide this? Certainly not, and don’t dare them. Can Spielberg’s accumulated capital prevent it from happening? No. If he makes two or three flops in a row, what will his strength as a competitor be worth on the capital markets? Somewhat less than it was before.

      2) The second point is more straightforward. You can’t really draw an analogy between alleged capital concentration in a freed market and actual nation-state power accumulation in recorded history. Why? Because the latter game is strictly zero sum, while the former is not, AND…because the latter game was played entirely with coercion (war) or the threat of coercion (diplomacy), while the former – a freed market – is defined by the absence of these things.

      • Sean II, I really don’t understand the argument of your first two paragraphs. If you are just saying that the reason some firms or people win the competitions they are in is due to their willingness to take risks, or their intelligence in the risks they take, then I am happy to incorporate those factors into what makes some competitors stronger and others weaker. But the fact is that firms compete, and as a result of the competition, some firms win, and as a result of that they take market share away from their defunct competitors and then use their expanded power to ward off other competitors and preserve their control. At least that’s the way it works in the industry I work in.

        In Spielberg’s industry, the reason one or two players don’t own all of the means of film production is in part because we have laws that prevent them from doing so, and also laws that prevent people from competing in the more ruthlessly aggressive ways that they would if there were not a powerful and broad-based state preventing them from practicing those methods. Without such a state, competition would assume the form of mafia competition, with corporate chieftains accumulating capital and the means of coercion, and consolidating power, and building coercive apparatuses of their own for both security and aggression. To prevent that degeneration into violent competition and aggression within some sphere or territory, the territory has to be governed by something that has at least as much power as the would be rivals who might emerge within the territory.

        The textbook picture that libertarians rely on showing the benefits of vibrant competition in free markets represents a highly unnatural and tenuous state of affairs. I don’t mean unnatural in the sense of “bad” – I mean it is unnatural in the sense that it is a form of social order not likely to emerge on its own without a great deal of human artifice, coordination and the coercive exercise of concentrated power that aims at creating and sustaining that order. It’s not a condition that evolves in the absence of state power, but a condition that can only be created through the exercise of state power.

        Libertarians like to suggest great disanalogies between the coercive law-imposing competition of rising and falling states and the seemingly more peaceful and mutually beneficial competition of rising and falling business enterprises. But the latter kind of competition is only made possible by the success of some entities at winning the former kind of competition, and then establishing a well-governed and civilly peaceful social order within which the latter can take place. This requires, among other things, establishing rules for the latter kind of competition, having and using the power to enforce those rules, and making a few interventionist governing choices about the mechanisms for distribution of the fruits of economic production so as to preserve social peace and consent.

        The things we call “states” are just those corporate entities that have won struggles for power in the past, and if the power of any one of these states is too much attenuated, then other entities will move quickly to control the territory that state previously controlled, through similar means. The aspirants might be existing rivals from without, or emerging rising aspirants from within. And if a state power that has previously been successful in maintaining something approaching a monopoly on force within a given territory loses that control, then emerging centers of power within the territory will quickly move to acquire and display that kind of force to reestablish order over some territory they can control.

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