Sunday, December 20, 2015

Corporations and Capitalism

Many libertarians are opposed to corporations, calling them creations of the state.  They certainly are creations of law. Corporations are an improvement over traditional modes such as Shariah law; and they have ancient roots of their own in Roman law. 

Before corporations as we understand them today were invented, unrelated people could only come together for business as partnerships. By law, if one partner died, the partnership was dissolved. No one can speak for a dead person. Limiting businesses to partnerships would make modern enterprise impossible. 

The family business is a different matter. Under traditional law, left over from agrarian times, the family business is a kind of farm, owned by the pater familias, and ownership passed by inheritance. In order to avoid the limitations of partnership, every co-owner would have to be adopted into the family. In that case, the head of the family decides your shares and your profits. That is what privilege is, literally, private law. The pater familias can do whatever on the farm. In Roman times, he could sell family members into slavery.

However, Roman law also recognized the collective entity: the herd. The herd exists independent of any one animal. If you buy or sell the herd, some die and others are born along the way. It is the same herd. Roman emperors granted charters to groups of individuals: burial societies and fire fighters were among the first. Some people claim that the Benedictine Order, chartered in 579, is the oldest continuing corporation. Wikipedia has other ideas here.  But note that many of those are family businesses. 

The modern corporation was the steam engine of commerce. It allowed the creation and management of capital on the scale demanded by the industrial revolution, and wholly beyond the needs of simpler, land-based societies. Shariah Law recognizes partnerships, not corporations. Also, it forbids the payment of interest. Anyone who lends money becomes a partner and shares in the profits. It worked well enough for simpler times and places. However, even Shariah recognizes something called a waqf. A waqf is like a foundation. It was created first over wells: everyone needs it; no one can own it; it must be managed for the common good. Sometime later - I know only about Cairo 1600 - the waqf was used to create family
Trustees of Dartmouth College
v. Woodward,
17 U.S. 518 (1819) was
the landmark case
in U.S. law for
foundations that let merchants aggregate their wealth without it being redivided by inheritances. 

In the West, universities were chartered as corporations to allow them to survive their founders. They also could make their own laws for their own communities: Bologna, Oxford, Cambridge, Padua, Heidelberg, ... When Cambridge discovered its original charter to be unhelpful, they went to Parliament for one -- and got a seat in Parliament as a result. Even Sir Isaac Newton served a term.

As for the modern corporation, you could not own most of your comforts without them. To condemn the entirety because of the actions of a few individuals is collectivism.

In the future, the corporation may be the legal structure by which a software earns its legal rights. We already have electronic filing. There is no way to know who the original actor is. She might be a program.

Capitalist Culture
Venture Capital
Money as Press and Speech
Numismatics: The Standard of Proof in Economics

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