The confusion over the nature of corporations

May 17th, 2012

There is a great deal of deeply seated confusion about corporations, their origins and true purpose. People who are intelligent and well read in the field of the philosophy of liberty sometimes fall short when it comes to understanding what a corporation is, why people use them and what the true nature of them are. On the one hand, they are for voluntary association, and yet on the other, they rail against corporations. This is illogical.

As it is with anything complex, clear thinking is needed when you try to think about corporations. Lets begin by taking apart the myth that they exist as creatures of the State.

There is no reason that in a free society without a State that a group of people cannot band together to work on a project under rules that they select for themselves. They pool their risk, and (for example) decide that they do not want to put all their capital on the line should something go wrong and face a court, however founded, deciding that they are liable.

A group of men who decide to share risk in a free society are free to set up any sort of entity they like under a mutually acceptable contract. This is the basis of an incorporation, and you do not need to invoke the State to be able to form one. The idea that corporations would not exist in a free society is a myth; risk will remain a factor of business in a free society, and incorporations are a way of mitigating it. When an incorporation in a free society offers its goods and services to other people, the clients are at liberty to pay for those goods and services or not, under the explicit terms that are offered to them, with all the guarantees and remedies that may or may not be on offer. Fundamentally this is no different to going into contract with an individual; it is a completely voluntary arrangement that you are free to decline or accept.

It is clear, when we think about a corporation in this way, that it is indistinguishable from entering into a contract with an individual. Since in a free society, no one is compelled to enter into a contract with a person or a corporation, there can be no objection from a correctly thinking Libertarian to corporations in a Stateless free society, without violating the free association principle that is at Libertarianism’s core.

Remember; none of this has anything whatsoever to do with corporations as they operate in and under the State. It is important not to conflate crony capitalism, ‘corruption’, the military industrial complex, fiat currency, central banking and all the other ills caused by the State with the simple benefit of pooled capital and limited liability under contract via the vehicle of an incorporation.

People who claim they are for free association cannot be against corporations. No one has the right to tell another man that he cannot contract on terms that are acceptable to him and other men or parties.

Unfortunately, the word ‘corporation’ is tainted and is not thought of correctly because it has accumulated heavy baggage thanks to the State and its corrosive influence. In principle there is no objection that a Libertarian can raise to people voluntarily associating and making offers under rules of their own choosing; it is merely another market transaction that free men can either accept or reject.

This is analogous to free men running a social club for their own benefit. No Libertarian would object to the idea of men freely associating this way, but for some reason their logic breaks down when we use the word ‘corporation’ to describe this group of people. As I say above, it simply is not logical.

There are many problems being caused by the State. It is unfortunate that there are some people out there who conflate this singular corrosive evil, the State, with its ill effects. What is interesting, and which you never hear the Libertarian anti-collaborationists explain, is how they are going to force voluntary corporations to cease operations and be broken up or prevent people from freely associating without violating the non-aggression axiom.

It’s an interesting question isn’t it?

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