TT's Lost in Tokyo — by TokyoTom

Historian and Constitutional scholar Kevin Guzman posted a comment on his Facebook wall on the Citizens United decision that I took a disliking to.

Here is his September 6, 2014 post and my responses (to him and his other commenters):

There’s a popular meme that “Corporations aren’t people.” The aim is to repeal the Supreme Court’s decision in Citizens United that Congress cannot under the Speech and Press Clauses of the First Amendment limit political advertising so stringently as it had been under the McCain-Feingold Act. The point of the meme is that only people are entitled to constitutional protections, and so Congress can do whatever it wants to corporations. Let’s follow the implications of the claim that “Corporations aren’t people.”

September 7 at 1:24am

Tokyo Tom Kevin, this is an interesting an important topic, which hasn’t been set up very well. 

First, I think you missed the gist of the Dartmouth case, which essentially said that NH couldn’t alter Dartmouth’s charter (which had been granted by the English Crown), because the corporate charter was a form of private contract that was protected from “impairment” by states under the Constitution. The case was brought by the Trustees of Dartmouth, and didn’t particularly “recognize that corporations do indeed have rights of individuals.” States responded by reserving greater powers when they create corporations.

http://en.wikipedia.org/wiki/Dartmouth_College_v._Woodward
http://www.oyez.org/cases/1792-1850/1818/1818_0
http://www.americanbar.org/…/students_in…/dartmouth.html

September 7 at 1:32am

Tokyo Tom Hopefully, we’re all clear on the fact that corporations are created by governments, were traditionally considered as forms of contracts and property rights, and have special powers, rights and characteristics provided by state legislatures that render them quite different from real, live human beings?

Unfortunately, many on the Left and Right are confused about the origin, history and nature of corporations. As I said to some progressives:

“Sadly, it seems that most if not all of the progressives here want to deny what cannot be denied: that corporations exist only because they are made by acts of legislative power of Governments. They also want to deny that the special characteristics that Govt give to “corporations” are the very attributes that lead to harms to others/social ills that continually fuel more regulation of corporations by governments.

“It’s hard to discern why they have these views–perhaps, because they are so ingrained in seeing Govt as their sole savior in fighting against corporate Frankensteins–but they are clearly incorrect, as a legal and historical matter.
Be that as it may, as a matter of understanding and attacking the roots of our problems, it behooves progressives to investigate and understand how government and corporations shape the incentives and influence the behavior of the people who find themselves within them.

“Not only do corporations exist only because of Govt, but it is clear that the reasons why corporations play such negative roles in society and have corrupted Govt are their state-granted characteristics that would NOT exist in a “free market”. Sole proprietorships, partnerships, associations and co-operatives do NOT have#LimitedLiability, unlimited lives, unlimited purposes, and the businesses do not have legal entity status different from the owners.

http://tokyotom.freecapitalists.org/…/corporations…

 

September 7 at 1:47am

Tokyo Tom Corporations have continued to find the Federal government and Supreme Court their friend in escaping control by the states that created them; see this pre-Citizens United post about the perversion of the anti-discrimination (due process/equal protection) provisions of the 14th Amendment (that used “persons” to protect freed slaves and unnaturalized Chinese) to require various states to treat corporations made in other states the same as their own corporations:

http://tokyotom.freecapitalists.org/…/corpspeak…/

 

September 7 at 1:51am

Tokyo Tom Karl Pope’s thoughts after Citizens United are largely spot on, and explain the drive that Sen. Colburn is now sponsoring to convene a Constitutional Convention to consider amendments:

http://tokyotom.freecapitalists.org/…/carl-pope-sierra…/

 

• Kevin Gutzman It’s impossible to remove money from politics. If you deny individuals the right to buy political ads, you’ve effectively elevated owners of media corporations to the status of Elite Class, as only they will be able to say what they want. On the other hand, the Tenth Amendment reserves power to regulate elections to the states; if they want to ban donations from out-of-state interests or individuals, they should be allowed to do so. Score another negative result for the Incorporation Doctrine.

  September 7 at 2:55am ·
• 

  Kevin Gutzman I think that all federal campaign regulation is unconstitutional, as nothing in the Constitution empowers Congress to regulate anything other than the “time, place, and manner” of elections. At the federal level, there’s no reason not to have a sunshine law requiring disclosure of all donations.

  September 7 at 2:57am · Edited ·
• 

  Tokyo Tom Good point, Savana — states can and should be able to condition any corporate license on things that the corporation cannot do in its own name, such as lobbying. 

  Such a conditioning of the grant of corporate charter would be Consitutional, and would NOT deprive any individual of his own rights to lobby (or to combine with other employees to do so).If we want to get crony capitalism and the runaway regulatory state under control, we should simply stop granting #LtdLiability to corporate shareholders, and restore shareholder responsibility to monitor risk management by executives and managers.

  http://tokyotom.freecapitalists.org/…/immodest…/

  Tokyo Tom Kevin, I didn’t realize that “deny[ing] individuals the right to buy political ads” was the premise here, but denying the “right” of state-made entities to buy political ads, make contributions etc.

  September 7 at 3:03am

  • Tokyo Tom From my own Constitutional analysis, corporations, as artificial things, don’t “speak” at all (just as a printing press doesn’t speak either); people speak. Unfortunately, corporations (including media corporations) HAVE become ways for people to mask WHO is speaking. I think it perfectly acceptable under state corporation law and under the 1st Ad to constrain certain types of corporate “speech”.

    September 10 at 7:00pm · Edited
  • 

    Kevin Gutzman Big money wins? Big money often loses. Google “Michael Huffington” or “Clayton Williams” and see what you find. Let people know who is doing the contributing.

    Note: I agree with Savana that foreign contributions should be illegal. In theory, they already are, although Bill Clinton took advantage of them, (in)famously.

    September 7 at 3:21am
  • 

    Kevin Gutzman The idea that I should be forced to contribute to Hillary2016! thrills me about as much as being forced to help fund the Westboro Baptist Church.

    Tokyo Tom SCOTUS has the First Amendment wrong －this was intended to bind tie Feds, at a time when corporations were profoundly despised and considered property of their shareholders, with rights only grudgingly granted by states.

    Property doesn’t “speak,” even as every single shareholder and employee retains full personal speech rights.

    September 8 at 1:33am · Edited

    Kevin Gutzman “Groups of people are not people.” — ISIS

    September 8 at 1:36am ·

    Tokyo Tom Mark, without corporations, are people UNABLE to associate to conduct business together?

    Corporations are creations of governments. People are not. Nor are voluntary associations of people, as businesses/partnerships, co-ops, unions or churches.

    September 9 at 1:27pm · Edited ·

    Tokyo Tom ISIS? “of course a few less than enlightened people are not seeing the distinction between an inactive band of musicians and a band of terrorists involved in current world affairs.”

    • http://m.huffpost.com/ca/entry/5722758

  September 8 at 11:12am

  Kevin Gutzman Right, they’re sheep.
  Special sheep with all the constitutional rights of individuals that they are capable of exercising–as I enumerated in my original post. The only one they don’t have is, “coincidentally,” the one the Democratic Party doesn’t want them to have.
  From Dred Scott to present, that’s the way Democratic Party “constitutionalism” works.

  September 8 at 11:35pm

  Tokyo Tom “Of course corporations have the same rights as people. A corporation is not a tangible thing. It is an abstract term describing a group of organized individuals/people.”Balderdash on a stick, that we are reminded of in the cases of BP and Fukushima. Show me any individuals without a government-made liability shield who could do the damage that corporations (and governments do). Where are the mass torts? The Superfund sites?

  Individuals, business partnerships and coops can all be kept in check (to a significantly greater degree) by others in the communities in which they live.

  http://tokyotom.freecapitalists.org/…/quot-biggest…/

  Kevin Gutzman Tokyo Tom, I got off at “Senator Joe Barton.”

  September 8 at 11:15pm

  Tokyo Tom State-made corporations are the health of the massive regulatory state, which is likewise the health of the crony corporations. It’s a rachet, and racket.

  Are you a Bootlegger, or a Baptist?

  September 8 at 11:38pm

  Tokyo Tom Let’s look more at BP as a “person”:|

  • 
    Jim Hightower:
    “And now, its rap sheet grows almost daily. In fact, the Center for Public Integrity has revealed that the oil giant’s current catastrophic mess should come as no surprise, for it has a long and sorry record of causing calamities. In the last three years, the center says, an astonishing “97 percent of all flagrant violations found in the refining industry by government safety inspectors” came at BP facilities. These included 760 violations rated as “egregious” and “willful.” In contrast, the oil company with the second-worst record had only eight such citations.While its CEO, Tony Hayward, claims that its gulf blowout was simply a tragic accident that no one could’ve foreseen, internal corporate documents reveal that BP itself had been struggling for nearly a year with its inability to get this well under control. Also, it had been willfully violating its own safety policies and had flat out lied to regulators about its ability to cope with what’s delicately called a major “petroleum release” in the Gulf of Mexico.

    “What the hell did we do to deserve this?” Hayward asked shortly after his faulty well exploded. Excuse us, Tony, but you’re not the victim here — and this disaster is not the work of fate. Rather, the deadly gusher in the gulf is a direct product of BP’s reckless pursuit of profits. You waltzed around environmental protections, deliberately avoided installing relatively cheap safety equipment, and cavalierly lied about the likelihood of disaster and your ability to cope with it.

    “It wasn’t our accident,” the CEO later declared, as oil was spreading. Wow, Tony, in one four-word sentence, you told two lies. First, BP owns the well, and it is your mess. Second, the mess was not an “accident,” but the inevitable result of hubris and greed flowing straight from BP’s executive suite.
    “The Gulf of Mexico is a very big ocean,” Hayward told the media, trying to sidestep the fact that BP’s mess was fast becoming America’s worst oil calamity. Indeed, Tony coolly explained that the amount of oil spewing from the well “is tiny in relation to the total water volume.” This flabbergasting comment came only two weeks before it was revealed that the amount of gushing oil was 19 times more than BP had been claiming.
    Eleven oil workers are dead, thousands of Gulf Coast people have had their livelihoods devastated and unfathomable damage is being done to the gulf ecology. Imagine how the authorities would be treating the offender if BP were a person. It would’ve been put behind bars long ago — if not on death row.
    [link above, past the Joe Barton part]

    And here’s a couple of fun video clips riffing on the nature of the unaccountability of corporate/BP execs (not to mention the absentee shareholders, “protected by limited liability” who are themselves “victims”):

    http://tokyotom.freecapitalists.org/…/satire-oil-spill…/
    http://tokyotom.freecapitalists.org/…/time-light-humor…/

    September 9 at 1:35pm

    Tokyo Tom Corporations are “Special sheep with all the constitutional rights of individuals that they are capable of exercising,” Kevin?
    Hah. Try limited liability for one.http://archive.freecapitalists.org/…/speech-and…

    September 9 at 1:41pm

    Tokyo Tom Corporations are the Health of the State. Is this why you and other good “conservatives” cheer them on, Kevin?
    http://tokyotom.freecapitalists.org/?s=health+of+state

    September 9 at 1:42pm

    Tokyo Tom Timothy, can I recommend you look at well-known Republican shareholder activist Robert Monks, and “drone corporations”?
    The most abusive crony corporations tend to be a low-performing bunch of listed firms, with no significant shareholder blocs:http://tokyotom.freecapitalists.org/?s=drone+corporation

    September 9 at 1:46pm

    Tokyo Tom Stacey, yes, my problem is with “corporatism” and how government-made corporations are the hand-maiden of both the snowballing state, crony capitalism, and confused people across the spectrum bewailing or defending “capitalism!” and “free markets”. is the natural result of governments creating Btw,
    1. BP is half Amoco, and ofc operates in the US through subsidiaries. Did you miss this in my quote? In the period just before 2010, “an astonishing “97 percent of all flagrant violations found in the refining industry by government safety inspectors” came at BP facilities. These included 760 violations rated as “egregious” and “willful.” In contrast, the oil company with the second-worst record had only eight such citations.”

    2. They “are sorry individuals, should they not have rights?”

    Which “they” are you talking about, and for what purposes? If you are talking about “speech”,” then in the case of BP, who is it who is speaking, and for whom? Who speaks for workers killed? Shareholders? Management? Who are the principals, and who are the agents?

    Every individual in BP/connected to BP retains personal rights to speak, and can form voluntary groups to do so if they wish–the doctrine Kevin is pushing is a socialist/collectivist one that DENIES individual accountability and and MASKS self-interest, thus forcing those who interact with or are affected by BP into a position where, since individual accountability is near-impossible, to seek government assistance in getting at least some collective responsibility, but little private redress — very little of whatever the government ends up collecting from BP will actually trickle down, and individuals will remain beholden to the government and to BP for risk management going forward, rather than having direct rights.

    See my above clips on BP cats and the Clarke and Dawe spoof for light takes on unaccountability and who speaks for whom.

    September 9 at 2:27pm

    Kevin Gutzman Tom, you have got to be kidding. The reason Obama wants to muzzle corporations is so that he can take more of our money and give it to his constituents, invite more Guatemalans to come here and become his constituents, etc. He sees them as an obstacle, and so he wants to undo American legal precedent dating all the way back to the days when a ratifier of the Constitution was chief justice of the Supreme Court. And you say that I am the one who is pushing statism. Since the Revolution of 1937, there has never been a time when the Democratic Party stood for originalism in constitutional interpretation; they always argue for new, unknown doctrines that advance redistribution, secularization, etc. This new idea that corporations don’t have the rights of individuals is more of the same.

    September 9 at 2:36pm · Edited

    Tokyo Tom The purpose of the First Amendment was to protect we the people from acts of the Federal government, NOT to protect state-created corporations from the governments and people who make them.The Federal government, this time through the Supreme Court, continues to play the role of helping elites, through state-created corporations, to destroy free markets and local representative government.

    I’m sorry to see so many deluded “conservative” cheerleaders for this.

    September 9 at 3:28pm

    Tokyo Tom The answer to the following question is “NO”: [Does it make any sense to treat corporations as “persons”, given the differences in incentive structures?]
    http://tokyotom.freecapitalists.org/…/sense-treat…/

    September 9 at 3:29pm

    • Kevin Gutzman Give me a break. The new argument that government can regulate corporate purchases of political advertizing is entirely about protecting incumbents from criticism. McCain said so, explicitly.

      September 9 at 3:29pm

      Kevin Gutzman If you think advertizing against Obama is “destroying free markets,” we speak different languages.
    • September 9 at 3:30pm
    • Tokyo Tom Whip conflation now, Kevin. Try addressing my actual arguments.

      September 9 at 3:32pm
    • Kevin Gutzman Show me where the Constitution gives Congress power to regulate purchases of political ads by corporations. You can’t, because it doesn’t. The argument that it does is based on the “reading” of the Commerce Clause invented by Klansman Black and his fellow FDR political hacks in the 1930s. It’s completely contrary to the 10th Amendment.

      September 9 at 3:32pm
    • Kevin Gutzman Case closed.

      September 9 at 3:33pm
    • Tokyo Tom I’m not a fan of the Feds regulating anything, Kevin. But the states that make corporations sure as hell have a right to limit what they can do in exchange for very special privileges granted.

      September 9 at 3:34pm
    • Tokyo Tom But I already addressed the First Ad several times upthread. Corporations are THINGS, not people. Things don’t “speak”, at least for Constitutional purposes.

      September 9 at 3:36pm ·
    • Tokyo Tom My argument doesn’t refer to the absurd Commerce clause jurisprudence at all.

      September 9 at 3:37pm
    • Tokyo Tom “The new argument that government can regulate corporate purchases of political advertizing is entirely about protecting incumbents from criticism.”

      I am sure that this IS the case now, but the argument against allowing corporations to speak (why does NYT get special treatment?) is 100+ years old — pretty sure I copied in a Teddy Roosevelt quote upthread.But you’re a HISTORIAN; you know this already.

      September 9 at 3:51pm

      • Stacey York Morris States that “make” corporations? Huh?

        September 9 at 3:40pm
      • Tokyo Tom Stacey, yes. Surely you’re aware of “corporation laws”, and checked out the Dartmouth case (rare exception of a one-off corporation made by King George). Corporations are creatures of governments — there are NO “free market” corporations.

        September 9 at 3:43pm
      • Tokyo Tom The American Taliban is alive and well in “conservatives” who reflexively defend as “free markets” the corporatism that has always fuelled the “Progressive” movement.

        We have our own Sunni and Shia, battling over who gets to control the State:http://tokyotom.freecapitalists.org/…/state…/
        http://tokyotom.freecapitalists.org/…/dysfunction…/

        September 9 at 3:50pm 

        Stacey York Morris States don’t create corporations. They tax them but thats not creation. I’m a teeny corporation and trust me, the state did nothing. States don’t have the right to silence them one bit. They do court them but that’s because they bring jobs for their state and lots of tax money. States like Maryland and California blackmail and harass them to death. Charge them for infrastructure and tax them at the federal rate which is highest in world, so they may find a state that is more friendly, but that’s not “creating” them. King George wasn’t a capitalist.

        September 9 at 3:53pm

        Tokyo Tom Stacey, unfortunately you’re sounding more like a liberal all the time, with the wrinkle that they deny that governments make corporations because it’s their view that the evil aspects of corporations are due to “capitalism” and “greed”, while with you it’s a desire to defend “free markets” from “greedy” and “grasping” GOVERNMENTS (did you NOT read the Sheldon Richman piece that you posted above)?Undeniably, corporations are made by governments; the fact that governments have, via a race to the bottom have “democratized” the process doesn’t change its nature. Rather, it simply masks the deep roots of corporatism and the reasons for the regulatory state.

        I explained this upthread already, with excerpts from this blog post:

        http://tokyotom.freecapitalists.org/…/corporations…/

        September 9 at 4:51pm

        • Brett Sylvester ^ Funny how advocates of free markets can perfectly predict the property norms that would arise in the absence of a sate…

          September 9 at 5:29pm
        • Tokyo Tom Brett, if you’re talking to me, I fail to see how you’re addressing anything I’ve said.

          Propertyrights continuously evolve in all societies, as technology, demand, mores and institutions change.So?

          September 9 at 9:45pm · Edited
        • Tokyo Tom Jeff, focus. We’re only talking about the corporate form – which is undeniably a creature of governments and not free markets. Our Founding Fathers all knew this, and detested the Crown’s corporations/monopolies － does the original Tea Party not ring a bell?

          But you raise an important issue － the deep entanglement of government with business that flows from government creation of corporate forms is what underlies people bashing “business” and “capitalism” when they mean corporatism, as well as why they think governments have rights to micromanage business.

          September 9 at 9:58pm

          • Kevin Gutzman I reference specific provisions of the Constitution, and Tom invokes proto-fascist Theodore Roosevelt. Non sequitur.

            September 10 at 2:05am
          • Kevin Gutzman I agree that states have a right to regulate corporate behavior. I oppose the Incorporation Doctrine.

            September 10 at 2:06am

            Kevin Gutzman Since a corporation’s holdings are the pooled property of its shareholders, yes, it has fiduciary responsibility for the property to which they have a natural right. That’s why in Dartmouth College v. Woodward (1819), Chief Justice Marshall spoke of the shareholders’ rights in considering the College’s claims.

            September 10 at 11:33am

            • Kevin Gutzman Some corporate crimes lead to incarceration of officers, some don’t.
              The reasons there’s a move to deny that corporations have rights are two: 1) that some politicians don’t like being criticized, and so want to ban corporations from contributing to campaigns against them (as McCain said in explaining the McCain-Feingold Law); and 2) that there’s a general tendency for the Federal Government to deny all rights as they come to mind, and Citizens United brought this particular set to mind.

              September 10 at 2:12pm ·
            • Tokyo Tom “I reference specific provisions of the Constitution, and Tom invokes proto-fascist Theodore Roosevelt. Non sequitur.”Hah. The historian can’t recall or research the history of his own thread.

              Kevin, you said “The new argument that government can regulate corporate purchases of political advertizing [sic] is entirely about protecting incumbents from criticism”; I didn’t disagree as to Dem motives now, but simply said “the argument against allowing corporations to speak (why does NYT get special treatment?) is 100+ years old” and referred to your proto-fascist Teddy Roosevelt.

              September 10 at 7:29pm ·
            • Tokyo Tom “I agree that states have a right to regulate corporate behavior. I oppose the Incorporation Doctrine.”Glad we agree on the first point; on the second, with the exception of Citizens United (on the First Amendment), much of the history of extending Constitutional rights to corporate “persons” has been of “Incorporation” — viz., making the Bill of Rights applicable to state and local governments through the due process clause of the Fourteenth Amendment. Corporations now have fourth amendment safeguards against unreasonable regulatory searches; fifth amendment double jeopardy and liberty rights; and sixth and seventh amendment entitlements to trial by jury.

              You oppose these extensions to state-made corporations, presumably, Kevin?

              Then you also OPPOSE the Supreme Court’s SUMMARY extension of its new First Amendment doctrine to the STATES via the 14th Ad “Incorporation” doctrine, in the 2012 Montana case, American Tradition Partnership v. Bullock?

              If you are, then I commend you — other than your failure to point it out to people on this thread.

              http://thehill.com/…/234515-supreme-court-reaffirms…

              September 10 at 9:44pm · Edited ·
            • Tokyo Tom Brett: “You’re claiming that society would necessarily not be ordered in a certain wayin the absence of a state, when there’s no reason that it couldn’t be.”No, I’m not; I’m just saying that corporations are made by governments and have rights granted by governments, and observing that these are rights that you and I don’t have — owners of unincorporated businesses don’t have limited liability to persons who they may injure, we die, etc.

              As Marshall said in Dartmouth: “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it either expressly or as incidental to its very existence.”

              September 10 at 8:00pm · Edited
            • Tokyo Tom “in Dartmouth College v. Woodward (1819), Chief Justice Marshall spoke of the shareholders’ rights in considering the College’s claims.”

              
              You speak with great authority of matters that Marshall doesn’t address in his opinion. His chief point is to determine that the grant of Dartmouth’s charter was a CONTRACT among the Crown, the founders (donors) and Trustees — not a trust with fiduciary obligations:“This is plainly a contract to which the donors, the Trustees, and the Crown (to whose rights and obligations New Hampshire succeeds) were the original parties. It is a contract made on a valuable consideration. It is a contract for the security and disposition of property. It is a contract on the faith of which real and personal estate has been conveyed to the corporation. It is, then, a contract within the letter of the Constitution, and within its spirit also ….”
              http://www.law.cornell.edu/supremecourt/text/17/518…

              September 10 at 8:09pm
            • Tokyo Tom “The 14th Amendment applies to Americans.”

              Due Process and Equal Protection apply to “persons” (there were plenty of non-naturalized Chinese, and the Amendment also had to clarify state and federal citizenship), which is how railroad and other corporations have been able to escape the states and capture the feds.

              September 10 at 8:13pm
            • Tokyo Tom “The reasons there’s a move to deny that corporations have rights are two:”And then there are those who want to breathe real meaning back into “federalism” and states rights, and to end the conflation of corporation=business and crony capitalism=capitalism. 

              The key to regaining control over our lives from Big Brother and Big Corporations isn’t the Federal government, but by reining in corporations/revising corporation laws state-by-state.

              September 10 at 8:19pm
            • Tokyo Tom HEY THREAD FOLLOWERS —

              
              Kevin indicated above that, because he opposes the 14th Amendment “Incorporation Doctrine,” he “agree[s] that states have a right to regulate corporate behavior.”…

[cross-posted from The Anti-Establishment Center Community on Facebook]

A few thoughts on the notion of Govt-owned “property”, in connection with the radical misanthropes who have been ranching in Nevada for 100+ years on “Federal land”.

I’m afraid it’s turtles all the way down, with respect to corrupt “Govt ownership,” particularly with respect to the politics and special interests relating to the Bundy Ranch and Gold Butte:

http://www.infowars.com/breaking-sen-harry-reid-behind-blm-land-grab-of-bundy-ranch/

I haven’t been in communication with anti-IP stalwart and occasional sparring partner Stephan Kinsella for some time (I lost my appetite for his hostility), but I saw him recently on Facebook, where he had reposted a review he had done of the movie “Avatar”; as I had liked his review, I stopped by to say hello. [Note: my various #Avatar-related posts, from my blogging/commenting days at the Mises Institute, are here: http://tokyotom.freecapitalists.org/?s=avatar.]

What follows are his Facebook post and our ongoing dialog to date (some other persons also appear; cross-links after the name); stay tuned!

1. Kinsella (Feb 12 at 10:54 pm)

I confess, I am not the a very good movie reviewer. When I occasionally do one, they start looking dated within months. Anyway, I remember this one from 2009. I got tons of grief for it from fellow libertarians, e.g., if I recall, Michael Barnett.
…
http://www.lewrockwell.com/lrc-blog/avatar-is-great-and-libertarian/

2. TokyoTom (Feb 13 at 2:52 pm)

I didn’t give you any grief about it, Stephan – in fact I praised you for it – but then I’m a good statist, like you:
http://tokyotom.freecapitalists.org/2009/12/22/envirofacist-avatar-comments-quot-avatar-quot-resources-property-rights-corporations-government-enabled-theft/

3. Andy Katherman (Feb 13 at 11:51 pm)

Great movie review Stephan. I wrote something very similar back in 2010 on my blog (http://www.libertyforlaymen.com/…/natural-law-take-on…). Mind you, I was in my anarcho-libertarian “infancy” and more of a minarchist/Constitutionalist back then.

It’s funny James Cameron is probably more of a pinko-commie-ish-enviornmentalist than a libertarian, but I had the same reaction in that he actually presented a brilliant case for the necessity of property rights and lockean homesteading than pretty much any other movie that comes to mind… all the while doing it with great visual effects and a pretty decent plot!

4. TokyoTom (Feb 14 at 8:32 am)

Andy, Cameron wasn’t presenting a brilliant case for the necessity of property rights and lockean homesteading, but an allegory for the reality of corporate resource development around much of the world where native title is ignored, and a fantasy of natives fighting back. Of course it’s a more tangled reality, with governments frequently involved, wanting royalties, and arrogating rights to balance interests. BP and the Gulf of Mexico and the Kochs, Albertan oil sands and Keystone, for example.

5. Kinsella (Feb 14 at 8:43 am)

why add the word “corporate” Tom? What does that add to anything. There is nothing inherent in corporations that makes them more likely to violate rights. It’s just a form of business organization.

6. Andy Katherman (Feb 14 at 3:30 pm)

Disagree “TokyoTom”. I concede Cameron is probably an eco-nut of the “watermelon” variety (green on the outside, commie red on the inside) and has disdain for commerce, free markets, and “Capitalism” (properly understood)… and may not even care about property rights. But, the movie really is a terrific demonstration why property rights are a vital normative concept to reduce conflict over scarce resources. And, it also provided a case why aggression is Bad and why self-defense of homesteaded land/property/resources (Home Tree) is good and JUST. Yes, it is an allegory and it gets a bit weird at times (mystical-ish) but so what. It’s a frickin’ movie not a revisionist documentary. I still hold it is a great work of fiction and a mostly libertarian one at that.

7. Kinsella (February 15 at 12:32am)
Tom has long been a gadfly type. He supports all manner of unlibertarian proposals, but wants to fly the libertarian radical flag, and of course people like him start to feel uncomfortable so they start attacking anyone wiht principles. They basically become useless nihilists.

8. TokyoTom (February 17 at 12:01pm)

Stephan, that last comment is a very impressive demonstration of confused, unprincipled, unconstructive blatheration. It’s the kind of reflexive, self-satisfied hostility I expect to see of statists, but am a bit embarrassed to see from self-ascribed ‘anarchists’/libertarians. Nice show.

9. Kinsella (February 17 at 12:03pm)

apparently the existence of principled libertarians drives the pragmatists and minarchists and middle-of-the-roaders nuts.

10. TokyoTom (February 17 at 12:04pm)

Andy, thanks for the comment. Dunno why you feel the need to bash Cameron as a “watermelon” “eco-nut”, when he has made it clear in other contexts that he is standing up for the rights of native peoples.

The struggle he addressed in Avatar is still very much underway; see this from recent news? “To get the gold, they will have to kill every one of us”

11. TokyoTom (February 17 at 12:08pm)

Stephan suggests that “There is nothing inherent in corporations that makes them more likely to violate rights. It’s just a form of business organization.”

I imagine Stephan can likewise not see the moral hazard trainwrecks that have also been set in motion by governments insuring deposits, protecting the shareholders of listed companies, owning and developing resources, or in regulating on the basis of pollutions or public health and safety, either.

12. Kinsella (February 17 at 12:12pm)

Governments violate rights when they insure deposits. You see, Tom, that is what libertarians are against–aggression, rights violations. People who privately organize their business arrangements in a certain way do not inherently or necessarily do this. See, so it’s irrelevant whether there is a “moral hazard” or not. Libertarians are not opposed to “moral hazards.” We are opposed to aggression.

13. Kinsella (February 17 at 12:16pm)

And the state does not “protect shareholders.” I have explained this in depth already. http://www.stephankinsella.com/…/kol100-the-role-of…/

and http://www.stephankinsella.com/…/kol115-mises-canada…/

14. TokyoTom (February 17 at 12:26pm)

Stephan suggests that I am a “gadfly” “unlibertarian” who “attack[s] anyone wiht principles” and who is a “useless nihilist” whom he has “principled libertarians” (AKA, himself) has “drive[n] nuts.”

I think that, unfortunately, what we have here is Stephan demonstrating the roots of property lie not in principles, but in the reflexive, bristling defense of what people (individuals and groups) regard as valuable enough to defend.

Calm down, Stephan.

15. TokyoTom (February 17 at 12:52pm)

Stephan is the kind of Bootlegger-Baptist critic who himself is a vociferous Baptist who is uncomfortable looking at how Govt sets up the Bootleggers who are gaming the system.

In free, voluntary markets, there is no Get-Out-of-Personal-Liability-for-Harms-Caused-to-Others-Free Card.

Limited liability for shareholders is a state-granted favor that is demonstrably at the bottom of the dynamic of people forever running to a gamed “democratic” government to make Govt make its creations behave more nicely (with the regulations then serving to protect the big, to limit competition, and to fuel corruption and further govt capture). As soon as governments began creating corporate monopolies and/or limited liability cos, then then judges followed suit by rejecting strict defense of property in favor of a pollution-/corporation-favoring “balance” of equities that Block noted.

16. Kinsella (February 17 at 2:28pm)

I explained in detail in the talks and blog post linked, why this is wrong. There is no reason to assume passive shareholders ought to be liable for torts committed by others. In a private law society, there is no reason to think shareholders would be liable in the first place.

17. TokyoTom

Stephan consistently attacks arguments I don’t make. It must be because he is more principled than I am:
http://tokyotom.freecapitalists.org/?s=limited+liability+kinsella

18. Kinsella (February 17 at 2:51pm)

Tom, you just stated your view that state limited liability for shareholders is some kind privilege. that implies it is giving someone a limitation on liability that they otherwise would have in a free market. It’s not a privilege unless it changes the situation.

19. TokyoTom (February 17 at 2:56pm)

Stephan: “In a private law society, there is no reason to think shareholders would be liable in the first place.”

In a private law society, one finds ALWAYS individuals and associations of individuals who may negotiate liability caps with voluntary counterparties, but remain potentially personally liable up to the remainder of their personal assets for harms that their activities (and those of their agents) caused to others.

While the persons who actually directly caused harms would of course be liable, their principals would try to limit their own potential exposure by either closely managing their agents or making sure that others were independent contractors.

Stephan defends a state-created order where it is now extremely difficult, if not impossible, for us (and tort victims) to determine WHO in fact acted and is responsible for vast harms, such as those produced by BP, WVa’s “Freedom Industries”, TVA, TEPCO and the like. Instead, Stephan grotesquely calls polluting companies “victims”.

20. Dan Cotter (February 17 at 3:17pm)

Does anybody else find it strange when people write their comments as if they are speaking to an audience rather than just directly speaking to the person they’re conversating with?

21. TokyoTom (February 17 at 3:44pm)

Dan, I’ve been talking with Stephan Kinsella for several years – putting me a ten-foot-pole distance has too often been one of his penchants, because his principles mean I stink. We’ve had a bit of a hiatus, so when I visited here, you can see that I addressed him directly; he shifted to the third person here: https://www.facebook.com/nskin…/posts/10151972701413181….

22. Kinsella (February 17 at 9:22pm)

haha, are you really criticizing me for using third person…? come on dude.

23. Kinsella (February 17 at 9:25pm)

“remain potentially personally liable up to the remainder of their personal assets for harms that their activities (and those of their agents) caused to others.”

This is almost right. You are liable for harms (some types anyway) caused by your *actions*. (“activities” is intentionally vague)

But shareholders do not act to cause the harm caused by employees of the company they have stock in.

“While the persons who actually directly caused harms would of course be liable, their principals would try to limit their own potential exposure by either closely managing their agents or making sure that others were independent contractors.”

Calling shareholders “principals” is question-begging. They are passive. I have explained this. So have other that I linked to–e.g. rothbard and pilon and hessen.

“Stephan defends a state-created order where it is now extremely difficult, if not impossible, for us (and tort victims) to determine WHO in fact acted and is responsible for vast harms, such as those produced by BP, WVa’s “Freedom Industries”, TVA, TEPCO and the like. Instead, Stephan grotesquely calls polluting companies “victims”.”

How is this supposed to be an argument that shareholders are causally responsible for torts of employees? Everyone seems to simply assume this respondeat superior type vicarious liability.

24. TokyoTom (Feb 19 at 4:52pm)

“‘activities’ is intentionally vague”

This is intentionally hair-splitting obfuscation; one “acts” – we call what people do both “activities” and “actions”.

– “shareholders do not act to cause the harm caused by employees of the company they have stock in.”

It is not my premise that they always/necessarily do — though of course, sometimes shareholders may be actively involved in torts tied to the business activities conducted by the corporation they own shares of. When judges “pierce the corporate veil”, they essentially treat shareholders as principals/partners/sole proprietors.

– “Calling shareholders “principals” is question-begging. They are passive. I have explained this.”

Suggesting I was calling shareholders principals is either stupidity or a deliberate misreading; I was clearly referring to private law orders/contractual arrangements outside of corporations, not state-made corporations: https://www.facebook.com/nskin…/posts/10151972701413181… (PS–I really don’t like this attack style, but perhaps tit-for-tat is the best approach with anarchists who prefer to set examples of disrespect.)

But yes, of course now, within the state-made corporate form — and especially within listed companies, shareholders MAY be (but are NOT necessarily) “passive”. But this is itself quite problematic, though not my chief point.

– “How is this supposed to be an argument that shareholders are causally responsible for torts of employees? Everyone seems to simply assume this respondeat superior type vicarious liability.”

You attack arguments that I do not make. This is your style is your wont, Stephan — I find it wanting. I have NEVER argued that “shareholders are/should be causally responsible for torts of employees” or just “assumed respondeat superior type vicarious liability”.

Partners and sole proprietors were/are not deemed automatically responsible for torts committed by their employees, yet the risk and expense of potential lawsuits has always served to have them pay attention to risks that their employees and agents might harm others. An artificial state-made liability cap freed shareholders from downside risks, and incentivized blind eyes to practices that were costly to others.

It is clear that respondeat superior doctrine was expanded judicially and by law as firms left the realm of private businesses and became favored creatures of the state.

I am glad you are paying some attention to questions of individual responsibility, though of course you have NOT done so consistently, when you persisted in calling “BP” a “victim” and ignoring the corporate problem of discerning who it is who acts:

“It is one of the salient features of corporations that they confuse themselves and everyone else as to WHO, precisely, is responsible for their actions and the harms they cause others, and it is time for Austrians to examine such features closely. – See more at: More about “the biggest victim”, BP, and how we can help it end its “victimization”

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

Thanks for playing, and for your decent Avatar post.

25. Kinsella (Feb 20 at 2:24 am)

“It is not my premise that they always/necessarily do — though of course, sometimes shareholders may be actively involved in torts tied to the business activities conducted by the corporation they own shares of. When judges “pierce the corporate veil”, they essentially treat shareholders as principals/partners/sole proprietors.”

I am at a loss to identify the coherent libertarian principle you are trying to invoke. Who cares about the modern positive state law of ‘piercing the corporate veil,’ for example–what possible relevance has this for justice?

“Suggesting I was calling shareholders principals is either stupidity or a deliberate misreading;”

oh, i assure you, I am merely stupid, not dishonest.

–Wait.

“I was clearly referring to private law orders/contractual arrangements outside of corporations, not state-made corporations: ”

Wasn’t clear to me, kemosabe, but then I don’t have your IQ or whatever.

“Partners and sole proprietors were/are not deemed automatically responsible for torts committed by their employees, yet the risk and expense of potential lawsuits has always served to have them pay attention to risks that their employees and agents might harm others. An artificial state-made liability cap freed shareholders from downside risks, and incentivized blind eyes to practices that were costly to others. ”

What does this frenetic screed of incoherent babble have to do with libertarian principles? Answer: not much.

“It is clear that respondeat superior doctrine was expanded judicially and by law as firms left the realm of private businesses and became favored creatures of the state. ”

So… you are in favor of respondeat superior. well Rothbard, Pilon, Hessen and I are not. Congratulations on your glomming onto the state schema.

26. TokyoTom (Feb 20 at 5:35 pm)

You disappoint by never failing to disappoint, Stephan.

1. “I am at a loss to identify the coherent libertarian principle you are trying to invoke. Who cares about the modern positive state law of ‘piercing the corporate veil,’ for example–what possible relevance has this for justice?”

You are at a loss to understand the libertarian principle that a man — even a shareholder — might be called to account for his own acts? I agreed that shareholders should not be liable qua shareholders, and simply indicated that they might be liable based on their own actions. Corporate “veil piercing” is justified if based on a fact-finding that a shareholder directed a tortious act.

2. “Wasn’t clear to me, kemosabe, but then I don’t have your IQ or whatever.”

Real gentlemen don’t find admissions of error so difficult, and sneering, gratuitous contempt and off-handed offensiveness so easy. Whatever.

3. Me: “Partners and sole proprietors were/are not deemed automatically responsible for torts committed by their employees, yet the risk and expense of potential lawsuits has always served to have them pay attention to risks that their employees and agents might harm others. An artificial state-made liability cap freed shareholders from downside risks, and incentivized blind eyes to practices that were costly to others. ”

You: “What does this frenetic screed of incoherent babble have to do with libertarian principles? Answer: not much.”

Kindly demonstrate that this is both babble, and babble not related to libertarian principles. Austrians are keenly attuned to moral hazard, and I was describing what I perceive as dynamics, not a principled position on liability rules (though LvMI has published pieces calling for a prohibition on corporations in the banking sector). But if I recall correctly, you too have indicated that you oppose the state structuring of/stamp of approval on corporations.

Your own frothing has nothing to do with libertarian principles, and in fact demeans them.

4. Me: “It is clear that respondeat superior doctrine was expanded judicially and by law as firms left the realm of private businesses and became favored creatures of the state. ”

You: “So… you are in favor of respondeat superior. well Rothbard, Pilon, Hessen and I are not. Congratulations on your glomming onto the state schema.”

Congrats on another false and unjustifiable conclusion. Par for your course. Austrians Mises, Hayek, Rothbard, Block, Cordato etc. all describe what they discern of the dynamics of human action within institutional structures; please congratulate them too for glomming onto the state schema.

Ad hom is a shameful game, Stephan. It discredits your good work that you that you thrill to it so much.

[from a comment at the “we build our society” Facebook group]

[A]s a factual matter, the greatest Industrial Revolution pollution occurred AFTER governments started to create #LimitedLiability corporations whose effect (and aim) was to protect INVESTORS from the downside risks of doing sh*t that hurt OTHER PEOPLE.

Even today, most of our largest social problems flow from risk socialization and lack of accountability, proximately resulting from wonderful LAWS that serve the powerful, while pretending to “protect” the poor and dumped upon.

Fukushima happened because NO ONE had any personal skin in the game. What happened was no “surprise” or “Act of God”, but an expected result where NO ONE was f*cking responsible for the downsides of poor decisions that benefitted themselves or their organizations, favored corporations with monopolies, whose shareholders and lenders are protected from liability, the banks that are protected by government, the executives and regulators who often retire to the regulated company, the mega-construction firms who built the reactors, the legislators who imposed taxes on all users to bribe the local communities into accepting them ….

Where no one is accountable, bad sh*t is no surprise, but more LIKELY to occur. The same story can be written of the BP/Gulf of Mexico disaster, the ongoing oil sands disaster, coal/oil pollution, the god-damned War Machine/Prison/Industry/Drug War complex, and the “unexpected” financial crisis resulting from monetary gaming by the Fed and a gazillion regs that left depositors and shareholders powerless in the face of looting by bankster elite-wolves.

The answer is NOT “more govt!” or “more regulation!”, but SMARTER regulation that RESTORES RESPONSIBILITY and stops the lie of govt “protecting” people. Keep regulating the old/big cos, but LET THE SMALL and ACCOUNTABLE BUSINESSES FREE. Firms run by managers who are members of the communities in which they operate, and whose owners have no government-granted #LimitedLiability be kept in check by their communities and the risk of losing their personal assets, and will, via the process of #CreativeDestruction, supplant the corrupt dinosaurs.

We can see the same phenomenon in extractive economies wherever governments own the resources, but locals own the risks – as in the Gulf of Mexico/BP (as I noted in a number of posts) accident, Nigeria, Ecuador/Texaco, etc.

We can also see this more generally with crony, corporation-based capitalism.

Japan’s version is more complicated and seductive: the locals get paid off – at the expense of electric power ratepayers who are subject to a government-supported monopoly – in a way that encourages them to abandon their own livelihoods and further dependent on handouts.

Below are excerpts from a May 31  article at the New York Times:  In Japan, a Culture That Promotes Nuclear Dependency

Excerpts:

When the Shimane nuclear plant was first proposed here more than 40 years ago, this rural port town put up such fierce resistance that the plant’s would-be operator, Chugoku Electric, almost scrapped the project. Angry fishermen vowed to defend areas where they had fished and harvested seaweed for generations.

Two decades later, when Chugoku Electric was considering whether to expand the plant with a third reactor, Kashima once again swung into action: this time, to rally in favor. Prodded by the local fishing cooperative, the town assembly voted 15 to 2 to make a public appeal for construction of the $4 billion reactor. …

As Kashima’s story suggests, Tokyo has been able to essentially buy the support, or at least the silent acquiescence, of communities by showering them with generous subsidies, payouts and jobs. In 2009 alone, Tokyo gave $1.15 billion for public works projects to communities that have electric plants, according to the Ministry of Economy, Trade and Industry. Experts say the majority of that money goes to communities near nuclear plants.

And that is just the tip of the iceberg, experts say, as the communities also receive a host of subsidies, property and income tax revenues, compensation to individuals and even “anonymous” donations to local treasuries that are widely believed to come from plant operators. …

In a process that critics have likened to drug addiction, the flow of easy money and higher-paying jobs quickly replaces the communities’ original economic basis, usually farming or fishing.

Nor did planners offer alternatives to public works projects like nuclear plants. Keeping the spending spigots open became the only way to maintain newly elevated living standards.

… Towns become enmeshed in the same circle — which includes politicians, bureaucrats, judges and nuclear industry executives — that has relentlessly promoted the expansion of nuclear power over safety concerns. …

“This structure of dependency makes it impossible for communities to speak out against the plants or nuclear power,” said Shuji Shimizu, a professor of public finance at Fukushima University.  …

Much of this flow of cash was the product of the Three Power Source Development Laws, a sophisticated system of government subsidies created in 1974 by Kakuei Tanaka, the powerful prime minister who shaped Japan’s nuclear power landscape and used big public works projects to build postwar Japan’s most formidable political machine.

The law required all Japanese power consumers to pay, as part of their utility bills, a tax that was funneled to communities with nuclear plants. …

Political experts say the subsidies encourage not only acceptance of a plant but also, over time, its expansion. That is because subsidies are designed to peak soon after a plant or reactor becomes operational, and then decline.

“In many cases, what you’ll see is that a town that was depopulating and had very little tax base gets a tremendous insurge of money,” said Daniel P. Aldrich, a political scientist at Purdue University who has studied the laws.

As the subsidies continue to decline over the lifetime of a reactor, communities come under pressure to accept the construction of new ones, Mr. Aldrich said. “The local community gets used to the spending they got for the first reactor — and the second, third, fourth, and fifth reactors help them keep up,” he added.

Critics point to the case of Futaba, the town that includes Fukushima Daiichi’s No. 5 and No. 6 reactors, which began operating in 1978 and 1979, respectively.

According to Professor Shimizu of Fukushima University, Fukushima Daiichi and the nearby Fukushima Daini plants directly or indirectly employed some 11,000 people in communities that include Futaba — or about one person in every two households. Since 1974, communities in Fukushima Prefecture have received about $3.3 billion in subsidies for its electrical plants, most of it for the two nuclear power facilities, Mr. Shimizu said.

Despite these huge subsidies, most given in the 1970s, Futaba recently began to experience budget problems. As they did in Kashima, the subsidies dwindled along with other revenues related to the nuclear plant, including property taxes. By 2007, Futaba was one of the most fiscally troubled towns in Japan and nearly went bankrupt. Town officials blamed the upkeep costs of the public facilities built in the early days of flush subsidies and poor management stemming from the belief that the subsidies would remain generous.

Eisaku Sato, who served as the governor of Fukushima Prefecture from 1988 to 2006 and became a critic of the nuclear industry, said that 30 years after its first reactor started operating, the town of Futaba could no longer pay its mayor’s salary.

“With a nuclear reactor, in one generation, or about 30 years, it’s possible that you’ll become a community that won’t be able to survive,” Mr. Sato said.

Futaba’s solution to its fiscal crisis was to ask the government and Tokyo Electric, Fukushima Daiichi’s operator, to build two new reactors, which would have eventually increased the number of reactors at Fukushima Daiichi to eight. The request immediately earned Futaba new subsidies.

“Putting aside whether ‘drugs’ is the right expression,” Mr. Sato said, “if you take them one time, you’ll definitely want to take them again.”

Eiji Nakamura, the failed candidate for mayor of Kashima, said the town came to rely on the constant flow of subsidies for political as well as economic reasons. He said the prefectural and town leaders used the jobs and money from public works to secure the support of key voting blocs like the construction industry and the fishing cooperative, to which about a third of the town’s working population belongs.

“They call it a nuclear power plant, but it should actually be called a political power plant,” Mr. Nakamura joked.

In surfing for a simple post on moral hazard to distribute last week to a leadership seminar that I’m faciliating at a university here (not wanting to hazard my double-secret identity by proffering a post of my own), I stumbled across this little, thought-provoking piece from Joshua Pelton-Stroud.

This was posted June 13 2010, in the midst of last year’s little oil spill — for which, it seems, naturally enough, NOBODY is responsible. Corporations are now simply Acts of God, and the health of the State (emphasis added):

I copy below some more of my dialogue with Stephan Kinsella and others, regarding Jeffrey Tucker‘s unhappiness that not all libertarians are cheerleaders for our current model of “capitallism” (see my eariler posts on “scrupulosity“).

Stephan does a great job at wrestling with strawmen, attributing to me positions that I have expressly argued against, and questioning my forthrightness and my dislike for the state:

{Folks apologies if you are seeing disordered paragraphs; the blogging software seems to do that frequently when one copies in various blocks of text. I have added a few numbers to make chronological order clear.)

1.  Stephan Kinsella June 5, 2011 at 8:33 am

Calling shareholders “passive” might be a fair representation of the existing, government-created system – especially for listed, “public” companies, but that’s pretty much my point. This is NOT true of partnership or other traditional types of business organization,

See Hessen et al.–it is true of limited liability partnerships, where you have limited partners who are passive, and general partners who are active.

But even for a general partner–why is he automatically liable for what torts employees commit? this hoary, feudal notion of respondeat superior–you are responsible for your “servants’” actions–is a bit insulting and elitist.

” and the grant of limited liability itself deliberately signals shareholders that they can turn a blind eye to activities that profit the company while posing costs and risks to others.”

If they would not be liable in the first place then it’s not a grant, any more than you, as a Walmart customer, are “granted” limited liability just b/c the law does not currently make you jointly reponsible for torts committed by Walmart employees. I suppose you could argue this “grant” of limited liability to you as customer makes you as customer turn a blind eye to its risky activities. As I said in my post, this broad view of causal responsibiltiy would make everyone in society liable for everyone else all the time, without exception, which is why I analogized it to socialized medicine/Obamacare.

Sure, it’s probably not now “fair” to passive shareholders to “attribute vicarious liability to them … for torts committed by employees”, but that is both a strawman and besides the point. The point is that the government grant of limited liability MAKES A DIFFERENCE;

You keep saying it’s a grant but this is question begging, as this assertion assumes that absent this legal rule they would be liable vicariously under some libertarian principles of causation. I deny that they would. So if you say it’s grant you are arguing dishonestly by assuming your premise.

the strawman is that I am certainly NOT proposing a new rule that shareholders be assigned liability for acts by corporate employees, but simply that the limitation on liability be eliminated

WElt he state should be eliminated of course. There should be no laws whatsoever regarding corporations. I agree with this. The limitation of liability law should be abolished. I of course agree, which shoudl be apparent from reading what I have written since unlike many left-libertarians who are vague and maunder and equivocat and are disingenuous I try like Rothbard to be clear and upfront, and am very openly anti-state. I simply disagree with people like you who explicitly or implicitly propose that in a free society it would be appropriate to automatically hold the equivalent of passive shareholders (whatever you call them) vicariously responsible for others’ torts. If you think removing limited liability would make a difference, this is your implicit view. This is what I disagree with; your distractions seem to be an attempt to cloud the water to make it hard to see that this issue is at the heart of our disagreement.

– just as other grants by the government of liability limits (nuclear power, offshore oil drilling, and pollution permitting generally) should be eliminated.

Yes, I agree, but that is a bad analogy b/c those ARE real limits that do have an effect, unlike the shareholder case which does nothing IMO but ratify the situation that would obtain anyway.

Your assertion that limited liability of shareholders “would also be present in a free society in which private contractual ‘corporations’ arose” is totally unsupported. Can you point to where Rothbard, Hessen or Pilon argue that private contracts that limit liability of investors against voluntary creditors could serve to limit their personal liability against INVOLUNTARY creditors, viz., tort victims?

It’s not contracts that do it. It’s simply the fact that tort victims can pursue the tortfeasor, and the shareholder is not the tortfeasor; and there is no ground for making the shareholder liable vicariously for the employee’s torts.

And yes, see: Rothbard on Corporations and Limited Liability for Tort; Legitimizing the Corporation and Other Posts; Defending Corporations: Block and Huebert; Pilon on Corporations: A Discussion with Kevin Carson; Corporations and Limited Liability for Torts; In Defense of the Corporation

For example, see pilon http://www.stephankinsella.com/wp-content/uploads/texts/ga-l-rev-1979_6.pdf pp. 1310-. for Hessen, see this excerpt,http://www.lewrockwell.com/blog/wp-content/uploads/2004/04/Hessen+corporation+tort+liability+excerpts.pdf , pp. 18-20
and http://www.stephankinsella.com/2010/02/rothbard-on-corporations-and-limited-liability-for-tort/ — this last post also quotes Rothbard: “Similarly, if a corporate manager committed a wrong and damaged the person or property of others, there is no reason but “deep pockets” to make the stockholders pay, provided that the latter were innocent and did not order the manager to engage in these tortious actions.”

So, Rothbard, Hessen, Pilon–all hold that passive shareholders are not automatically liable vicariously for torts committed by employees, any more than limited partners would be.

Just as you, surely, have no objection to private agreements between parties to protect the information created by one of them (private “intellectual property”)

I would not call it that. “Intellectual property” is a propaganda term invented recently to justify state grants of monopoly privilege (patent and copyright)http://blog.mises.org/14914/intellectual-properganda/

but simply oppose state-created IP, so too should you (as a lawyer!) be able to understand that in principle, of course, I have no objection to contract-based companies, but oppose the obvious and important favors granted by the state in the case of all corporations?

You are confusing the case for contractual limited liability of shareholders for contractual debts, with the case for shareholders not being liable vicariously for others’ torts. The latter is not based on contract.

2. Not to be missed is that the grant of limited liability is extremely important and consequential:

See: The Cliff Notes version of my stilted enviro-fascist view of corporations and government – TT’s Lost in Tokyo http://bit.ly/9oBkC7

It has allowed owners to divorce themselves from formal reponsibility for the acts of their agents/employees, to divorce themselves from the communities in which their firms act, and to dodge claims of moral responsibility.

So what? this is not a justification for a law. It’s just some “policy” musings.

So we are left with massive corporations which are massively entangled with government

That’s b/c there is a state (which you favor, not me; I’m the anarchist), not b/c of the way people would create firms on the free market

and are powerful buyers of favors, which citizens forever clamor for “more control!”, and which lack any clear locus of responsibility — and in which we find anarchist libertarians like yourself and Lew Rockwell acting as their lawyers, and calling them and their shareholders “the biggest victims” (not the little people on the short end of the stick of projects like Gulf oil drilling, nuclear reactor meltdowns or even mundane health/air/water/soil damage from pollution)

Emotivism. You are not making an argument. It is not unlibertarian to have a view as to who is victimized by a given state policy. In fact the central state whose legitimacy you yourself support claims the overlord/landlord status in the offshore continental shelf; BP held a lease. It was your central state that is the landlord whose tenant had the oil spill. By your principles of vicarious responsibilty where you want to willy nilly say some old lady holding a single share of BP stock should be personally liable for this tort, of course the landlord should be too, right? I.e., your state is responsible, so why are you blaming me for favoring private investors in a free society, when you support the very state’s existence, the state that is responsible for the BP spill in the first place? And of course the nuclear industry is heavily distorted and corrupted by the state; Chernobyl was teh state’s fault, and the entire meltdown-prone western nuclear industry was corrupted by your beloved state for military reasons — instead of safe Thorium we needed the current system to produce nuclear weaponshttp://www.libertarianstandard.com/2011/04/01/the-states-corruption-of-nuclear-power/

So blaming this on private investors is rich. It’s the state’s fault, as usual. You think that getting rid of one of the few state laws that happens to mimic the likely result on a free market (limited liability for passive shareholders) is what you should focus on?!

As Mises long ago noted, moral hazard matters.

This is how statists and law professors reason. It is not how libertarians reason. We believe in individual rights–property rights–and have principles. we don’t run around “weighing” various “policy reasons” to tweak and fine tune statist positive law.

3. While in principle any partnership can keep going even when one partner dies or decides to leave and new partners are added, surely you are aware that this is a very cumbersome process, not in small part because of the concerns that the partners and its lenders, suppliers and customers all have about who, precisely, is managing the business and who has liability for potential losses?

Nonsense. SEe the Hessen excerpt above, p. 17, regarding how partnerships or firms can easily make the firm effectively immortal by use of continuity agreements. This is not hard.

Just as for limited liability,

More question begging, as I have explained

the grants of legal entity status,

this is not a gift but an unnecessary status that the state uses to justify regulation and double taxation of shareholders. In a free market firms would not have legal personality nor do they need to. Hessen has already explained this almost 30 years ago.

unlimited life,

See Hessen, last mention above. This can be done contractualy.

unlimited purposes and the ability to own subsidiaries are all substantial AND consequence-laden gifts from the state.

The purpose is whatever the shareholders agree to. It has nothing to do with the state just as marriage should not. Ownign a subsidiary is not a privilege but just another contractual private scheme. Nothing you described is a gift fromt he state. All these features are doable privately and contractualy, except for entity theory which is not a gift but a penalty.

Show me a partnership that has any of these, without a grant from the state.

This is like asking me to show you a 100% reserve bank. They are not used now b/c the state’s fractional reserve/guaranteed system outcompetes it. If I want a perpetual firm I just use a corporation b/c the state provides this mechanism. In a free market people would have to do it privately contractually, on their own; I have no idea if they would be called limited partnerships, LLP, LLC, or what. Who cares? IT’s just a detail. Get the state out of the way, and we’ll see.

Waht i object to is your clamoring for shareholders to be liable, when you have no theory whatsoever undergirding this.

The state creation of corporations has do much to muddle who, exactly, is responsible for injuries to third parties caused by “the corporation”.

So what, really? In most cases the corporation pays the victim, and has assets to do so.

Getting rid of limited liability would do much to provide moral clarity,

Again, this is question begging, b/c you are assuming there would and should be liability for shareholders absent the limitation of liability law.

I would note that, just as if deposit insurance were eliminated, market actors would step up to advise on which banks are safe and to provide deposit insurance, so too would insurers step up if limited liability were ended.

We are NOT talking about bringing down capitalism.

I know, but this still does not justify your claim that shareholders should be liable vicariously for the torts of others. What is your theory of causal responsibility? I have tried to sketch one out — http://mises.org/journals/qjae/pdf/qjae7_4_7.pdf — and see no way to hold passive shareholders liable; confirming the reasoning on the same lines of Hessen, Pilon, and Rothbard.

TokyoTom June 5, 2011 at 10:00 am

3. TokyoTom June 5, 2011 at 7:14 pm

In addition to the comment that I blogged the other day regarding Jeffrey Tucker’s June 2 post, Scrupulosity and the Condemnation of Every Existing Business, I posed a question to Jeffrey in response to this further comment by him:

But Rothbard was not just an anarchist. He was an anarcho-CAPITALIST. From what I can tell, Rothbard has yet to win THAT victory among libertarians. They have learned from his anti-state writings, but have they learned from his economic writings on the absolute centrality of capital accumulation for the advance of civilization?

My question:

Stephan Kinsella kindly jumped in; his response to me on June 4 is here.

I use this blog post to copy my response to Stephan:

 I note my related earlier posts on deposit insurance and moral hazard:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=deposit+insurance

http://mises.org/Community/blogs/tokyotom/search.aspx?q=moral+hazard

I am prompted by recent events to follow up on thoughts I emailed to Sheldon Richman a few months back:

I feel strongly that If we want to fix the country (and if libertarians don’t want to be dismissed as irrelevant/patsies for rent-seekers) we need to find ways to restore shareholder ownership of downside risk. This is the only way to back away from the destruction of communities and our natural and government commons by faceless elites through corporations – and the battle for control over Government micromanagement that so often is captured by corporations and serves as barriers to entry.

Insurers would step in to help shareholders and act as a check on management.

The states that create corporations retain power under the 14th Amendment to discriminate in favor of local, unlimited liability forms of corporation or corporations in which shares are not fully-paid up. There is nothing like a substantial risk tail to focus shareholders on managing management.

In addition, allow me to summarize thoughts that I have posted extensively elsewhere. The state has institutionalized moral hazard and exacerbated principal-agent problems via the grant of limited liability to corporate shareholders. This grant is at the core of why investors chose to us the corporate form (as opposed to traditional partnerships and older versions of corporations where shareholders retained substantial risk), and is something that cannot be obtained merely by voluntary transactions – as it involves future potential involuntary victims of acts by the new corporate legal entity (lenders and other parties can of course agree in advance to liability caps and recourse limits). 

This state intervention has set in motion and greatly fuelled the growth of government and battles with citizen groups over the wheel of government — battles in which insider elites, generally acting through long-lived and deep pocketed corporations that are armed with greater knowledge and cloaked with anonymity, have the overwhelming advantage. I earlier summarized these dynamics here: The Cliff Notes version of my stilted enviro-fascist view of corporations and government

As I have noted elsewhere: I am NOT arguing FOR a general rule that shareholders SHOULD be liable for corporate torts. Rather, I：

(2) note that the limited-liability corporate form has enabled risk-generation and -shifting on a massive scale, with innocent third parties frequently being stuck holding the bag (not solely when liabilities exceed assets, but more generally since the cycle of escalating government interventions to rein in corporations perversely ends up raising barriers to entry and giving corporations regulatory “rights to pollute” that curtail liability even when sufficient assets are available),

(3) argue that libertarians should reconsider the grant of limited liability for torts (as opposed to limited liability as to those who contract with the corporation on a voluntary basis) not simply because it is clearly non-libertarian to begin with, but because it has had profoundly perverse consequences (consequences at a serious enough level that state-loving libertarians in effect concede simply by troubling themselves to argue against curtailing limited liability),

(4) note that the most efficacious way to roll back the regulatory state lie in the direction of shifting ultimate responsibility for managing risks to enterprise owners (and ending the counter-productive regulatory risk-management experiment), and

Nick Sorrentino is the Austrian-leaning editor of The Liberty and Economics Review blog and CEO of Exelorix.com, a social media management company.

Being a sucker for building discourse and pursuing collaboration, I took a fancy to a recent post of Nick’s where he suggested just such things. Nick gracefully agreed to let me cross-post it in its entirety below.

I note that my own leanings on free-market reforms are toward ways to address corporate statism and over-regulation; e.g., Limited Liability, Avatar, BP+Gulf, the “environment“, and  David Korten’s “10 Common Sense Principles for a #NewEconomy” http://bit.ly/fW4Pu8.

Without further ado, here’s Nick: 

 A chance for the right and left to come together on free market reforms. (April 30, 2011)

By Nick Sorrentino

What is a free market? It is the free exchange of goods or services without intervention from coercive elements. In a free market price signals can be found. Too much of something? The price goes down. To little? The price goes up. It’s a simple equation yet history has shown us that it is very difficult for humans to simply let the market work.

I won’t get into whether the market always works. I basically believe that it does, but some good arguments can be made against my position in some very limited situations. Generally speaking however I think that most people would agree that a non manipulated market is a market that serves the most people and does the most “good.”

What is interesting to me is that many folks on both the right and left agree on this principle. Sure there are those on the fringe who will argue that markets are somehow “immoral.” But most Americans I believe just want a level playing field. The left doesn’t want cozy deals for corporations and the rich, and the right doesn’t want cozy deals for corporations and the rich. Whoa, hey, here’s an area of real agreement.

Many on the left don’t believe that the GOP would ever seek to end sweetheart deals for corporations. Many see the Republican Party as a vehicle by which companies game the system for their benefit. Many on the left do not believe in their heart of hearts that rank and file Republicans would ever be against special deals for “big oil” or “big agribusiness” or “big pharma” or especially “big finance.”

Likewise many on the right don’t believe that the left would ever give business a fair shake. But the distaste that many on the left have for business is not simply a hatred of all things business. What I sense is that many of my liberal friends mostly object to the “unfair” aggregation of power by businesses. They see an ever expanding Military Industrial Complex, bailouts to banks which result in big bonuses for a relative few, lax regulations for oil companies, and so on.

I’m here to tell you that there are many on the right who are ready to look very closely at the special deals many businesses have been able to garner for themselves. In a time of extreme economic challenge lots of folks who may have looked the other way before now recognize that such deals are unaffordable and frankly indefensible from a free market perspective.

I am also here to tell you that there are quite a few thought leaders on the left are open to the idea of freer markets so long as the special deals for many entrenched business interests are eliminated.

There is an emerging consensus on both the right and left that we must put our economic house in order. Eliminating sweetheart deals for businesses and unions could be an area where right and left can come together and actually get something done that would help the country at large.

At this moment I think it is on the left to reach back out to the right. Right now the GOP has extended a hand.

On Monday Speaker Boehner was interviewed by ABC News and he stated publicly that oil subsidies for instance are on the table.

Also this week at a town hall meeting House Budget Committee Chairman Paul Ryan said;

“We’re talking about reforming the safety net, the welfare system; we also want to get rid of corporate welfare. And corporate welfare goes to agribusiness companies, energy companies, financial services companies, so we propose to repeal all that,”

In addition to these two very important statements this week, last month a letter released by the National Taxpayers Union and signed by 30 conservative groups including Heritage Action for America (part of the Heritage Foundation), Taxpayers for Common Sense, FreedomWorks, Americans for Tax Reform, Americans for Prosperity, Club for Growth, and the Competitive Enterprise Institute called for the elimination of all energy subsidies and loan guarantees for the energy sector. This is a huge development. Subsidies are not free market, now it seems the freemarketeers are ready to come out and say it.

So, left, the ball is in your court. What are you bringing to the table?

This article was also published on The Republican Leadship Network site.