How we fuel crony capitalism; Dialogue with Kevin Gutzman on the Constitutional “speech” rights of state-created corporations and Incorporation Doctrine

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Historian and conservative Constitutional scholar Kevin Gutzman 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:

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.”

So you’re going to deny corporations constitutional rights. Does that mean the government will be able to search corporations’ property without warrants? Take their property without trial? Try them without counsel? Censor their publications? Punish them under ex post facto laws? House soldiers in their property during peacetime? Force them to pay to support churches?

At least as early as Dartmouth College v. Woodward (1819), the Supreme Court recognized that corporations do indeed have rights of individuals. To say that they didn’t would mean empowering government in new and dangerous ways. Besides, we all know that shareholders–corporations–are people. They’re not hamsters. They’re not sandwiches. They’re not automobiles. They’re people.

After a bit of dodging, Kevin finally conceded that: “I agree that states have a right to regulate corporate behavior. I oppose the Incorporation Doctrine.”

I consider this an important point: here we have a conservative legal historian/legal scholar essentially saying that he OPPOSES the Supreme Court’s SUMMARY extension of its new First Amendment doctrine in Citizens United to the STATES via the 14th Amendment “Incorporation” doctrine, in the 2012 Montana case, American Tradition Partnership v. Bullock.

 

Below are relevant excerpts from the comment thread on Kevin’s post — my responses (to him and his other commenters) and his own further contributions (light correction of typos and emphasis/formatting added):

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 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.

Property rights 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.”…

– See more at: http://tokyotom.freecapitalists.org/2014…

Note to Larry Lessig: Shall we amend the Constitution, but ignore possible reforms to limited liability corporation laws in the fifty states?

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When Larry Lessig launched his “Anti-Corruption Pledge” last year, I commented on the Wiki page he set up for it, and left a copy in an earlier blog post.

Larry responded the next day. I copy here both his reply and my counter-comment:

But even if Limited Liability is a more fundamental problem, which I’m not convinced it is, but if: You still need the means to address it, which you don’t have till you address the money problem first. Lessig 10:44, 5 March 2012 (EST)
Larry, thanks for your comment, but I’m not sure I follow you. I think it is a fundamental mistake to ignore that corporations are created in states, despite their tendency to accept if not push for the federalization of corporate law.
Sure, we can try to address money in campaigns at a federal level, but that’s no reason to turn our back on the leverage that we have in fighting for more responsible corporations – and corporate owners. It’s alot easier to win at least one small victory when you’re also fighting in 50 smaller fora rather than just one big one. TokyoTom 14:44, 17 March 2012 (EDT)

Yes, there’s a problem with “Libertarian Wishful Thinking.” But there’s hope, despite Bob Higgs’ clear-sighted glumness.

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[cross-posted from my Ludwig von Mises Institute-hosted blog.] 

Robert Higgs, Senior Fellow in Political Economy and Editor at Large, The Independent Review, has a piece up at The Independent Institute (last Tuesday, April 9), “Libertarian Wishful Thinking,” that is worth a “gander”.

I’d like to focus on the paragraphs excerpted below, and then give Bob and other lovers of freedom a little “goose”.

Says Mr. Higgs:

As a rule, libertarians incline toward wishful thinking. They constantly pluck little events, statements, and movies from the flow of life and cry out, “Eureka! Libertarianism is on the march!” With some of my friends, this tendency is so marked that I have become amused by its recurrent expression—well, there he goes again!

Some of this tendency springs, I believe, from their immersion in abstract thought and writing. …

One who maintains, as I do, that the existing system may crumble little by little, having heedlessly sowed thousands of poisonous seeds of its own destruction, but almost certainly will never just roll over and admit defeat, may seem to be a defeatist. But nothing is gained by entertaining an unrealistic view of what liberty lovers are up against. Even if one believes, as I do, that the existing system is not viable in the very long run, it may last in episodically patched-up forms for a long, long time. There are no magic bullets, such as abolishing the Fed. The state can use other means in the highly unlikely event that it should no longer have the Fed in its arsenal. The same can be said about most of the system’s other key elements. …

In truth, the time for liberty lovers to make a stand that had a fighting chance of success was a century ago. But that chance was squandered, if indeed it ever packed much punch. … Wishful thinking about the impending triumph of liberty may be uplifting for libertarians, but it avails neither them nor the world anything of real importance.

But it seems to me that while there is a great deal of truth here, simply acknowledging that vested interests are large and block change is not particularly productive and suffers from a failure to see the weak points in Goliath/Leviathan. Are there really no “magic bullets”? Are there no productive and achievable ways to “patch up” the system?? No leverage to apply to overthrow “this fascistic Rome”?

So I left the following comment; your further thoughts, here or at Bob’s post, are welcome:

While I think Bob is right that libertarians should lose their wishful thinking, I also feel that the real problem is that libertarians aren’t really putting on their thinking caps and thinking creatively.

“There are no magic bullets,” Bob says. But there ARE pressure points on which to focus.

Like attacking the corporate risk socialization that has fuelled upset citizens to act as Baptists in the charade so well played by the Bootleggers in building the Regulatory State.

Like using the states as experiments to create many agents of Creative Destruction against the Federal Govt and the crony capitalists.

Some thoughts here:

http://blogs.law.harvard.edu/tokyotom/2012/05/07/note-to-larry-lessig-on-his-anti-corruption-pledge-limited-liability-corporations-are-the-taproot-of-both-growing-government-and-anonymous-rent-seeking/

http://blogs.law.harvard.edu/tokyotom/2013/03/22/as-bob-monks-says-corporate-governance-has-failed-and-its-time-to-move-on-so-whats-next-unleash-the-hounds/

http://mises.org/community/blogs/tokyotom/search.aspx?q=limited+liability

I don’t think we need to throw our hands up at all, or to lose our optimism. Rather, we need to start finding ways to rein in risk socialization and the “Other People’s Money” game by requiring economic actors to have MORE personal “Skin In the Game.”

Hopefully,

Tom

TokyoTom | Apr 15, 2013 | Reply

As Bob Monks says, “corporate governance has failed and it’s time to move on.” So what’s next? Unleash the Hounds!

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[Cross-posted from my main blog, this is a precis of an earlier post, in which I had cross-posted a blog post by Bob Monks. Minor edits.]

As I noted, veteran shareholder activist Robert A.G. Monks has concluded that – in brief (emphasis added):

the people who exercise power for the corporations need to be accountable to somebody. Over the years, it has become clear that they really are not accountable to anybody, and our experiment in self-regulation and minimal oversight has failed. In practice, this has meant that a small group of individual CEOs exercise power over financing elections and lobbying the passage and enforcement of laws. …

Society is a give-and-take proposition but for now, the powerful take much more than they contribute and that is not sustainable.

For me, corporate governance has failed and it’s time to move on.

 

So what do we do? I’ve already discussed this in a number of posts relating to how the state grant of limited liability to corporate shareholders has released moral hazard on a massive scale, leading to pollution and labor problems, a cycle of pressure for government ‘protection’ and government capture. These problems have been compounded by the “Principal – Agent problem” on which Bob Monks is throwing in the towel, which problem has its roots in limited liability of shareholders and has been exacerbated by the very securities laws that purport to protect shareholders of listed companies.

I left the following response at Bob’s blog (emphasis added):

Posted by TokyoTom on Nov 3, 2011 at 12:32 PM

Bob, the answer is simple:

— Let shareholders of publicly-listed firms alone to figure out how to protect their own interests [sink or swim], and

— Let better managed firms that don’t tap public markets (and thus who have smaller numbers of more sophisticated investors who don’t need the dubious ‘protections’ of Government) eat the lunches of the bigger, more bureaucratic and less profitable public firms. In other words, the existing system can’t be saved, and it is not worth the effort.

What we need is a whole lot more of Schumpeter’s ‘Creative Destruction,’ which we can expect from private firms — which have been growing as Sarbanes-Oxley has helped large firms build barriers by walling off access to capital markets.

One action item that I still see as necessary is to encourage the use of alternative corporate/organization forms where shareholders/owners retain a significant tail of risk. Since it is the moral hazard and risk-shifting made possible by state-granted limited liability status that has also fuelled the growth of the regulatory state, states can also experiment with dramatically lowering regulations for smaller local firms where shareholders have unlimited liability or must pony up additional capital to pay damages for any torts.

Sincerely,

Tom

Published Sun, Dec 11 2011 1:29 AM by TokyoTom

BLOWBACK in Benghazi and Cairo – it’s not a BUG, it’s a FEATURE

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For those befuddled about the “Global War on Terror” and the attacks on US embassies/consulates in Libya and Egypt, perhaps this bit of fun from The Onion in 1998 might help:

State Department To Hold Enemy Tryouts Next Week (excerpts below; go to link for full piece)(emphasis added)

Taking steps to fill the void that has plagued the American military-industrial complex since the 1991 collapse of the Soviet Union, Secretary of State Madeleine Albright announced Tuesday that the U.S. will hold enemy tryouts next week. …

The decision to hold enemy auditions was made during an Oct. 16 meeting at the Pentagon attended by a number of top military-industrial-complex officials, including Albright, Defense Secretary William Cohen, the Joint Chiefs of Staff, Senate Armed Services Committee Chair Strom Thurmond (R-SC) and Lockheed Martin CEO Thomas Reuthven.

“Everyone was of the opinion that an enemy was needed–and fast,” said Reuthven, whose company has laid off 14,000 employees since the end of the Cold War. “Nobody wins when there’s peace.”

General Electric CEO Jack Welch, who was also at the meeting, agreed. “Our profits are down 43 percent from 10 years ago. We sold more tritium hydrogen-bomb ICBM/MIRV triggers in 1988 than in the last six years combined,” he said. “Something had to be done.” …

Speaking to reporters, McDonnell Douglas CEO Richard Klingbell said the State Department should have foreseen the possibility of peace and taken steps to avoid it years ago.

“For decades, we took Soviet aggression and the arms race for granted,” Klingbell said. “We failed to realize that one day it might all come to an end. We failed to sow the seeds of future foreign discord, for our children’s sake. Thankfully, though, we’re finally setting things straight. We’re finally remembering that to make it in this world, you’ve got to have enemies.”

Note to Larry Lessig on his “Anti-Corruption Pledge”: Limited liability corporations are the taproot of both growing government and anonymous rent-seeking.

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[Note: This is cross-posted from my blog (originally hosted at The Ludwig von Mises Institute)]

I refer to the very recently-launched “Anti-Corruption Pledgehere, which is the latest project by prolific Larry Lessig, now a Harvard Law prof and head of a corporate reform center there (and whom I have introduced and discussed in a number of preceding posts).

Larry further describes the purpose and motivation of the Pledge at his blog. (I note that I’m strongly in favor of pledges, as I noted in this blog post discussing the Kochs.)

I left the following comment on the discussion page of the wiki that Lessig created for The Anti-Corruption Pledge:

“Larry, you aren’t really attacking the chief problem, which the role that STATE-Created limited liability corporations play in centralization and aggrandizement of power in Washington, which then further attracts rent-seeking by increasingly anonymous (who owns and runs these corporations, anyway?) organizations that wish to use a bloated government to receive favorable inside deals and to raise barriers to entry in their respective markets.

“Corporations drive the growth of government because their LIMITED LIABILITY aspect means government protects shareholders from liability in the event of tort damage to workers/others/society. Citizens tired of holding the bag then must continually push legislatures and courts for “reform” that perversely helps to entrench the largest firms against newcomers.

“Corporations are not simply the “Health of the State”, but they’re created in STATES, which accordingly MUST be a main venue to seek to rein them in. States can stop creating limited liability companies, can deregulate for non-limited liability firms (where owners retain a large tail of risk), etc.

http://tokyotom.freecapitalists.org/?s=limited+liability

“Anonymity is not per se bad – the Federalist Papers and Anti-Federalist Papers were written anonymously – it’s the anonymity afford to those whom have already received important government privileges (viz., limited liability) that renders them and their agents unaccountable that is the problem.

“Thus I don’t see that public funding or limiting and requiring transparency of your broadly worded “political expenditures” (contributions? campaign ads?) really address the root problem.

“Fortunately, there are 50 states in which to start campaigning for responsibility owned businesses whose owners are NOT protected by governments from the communities in which they operate.

“Large, entrenched public companies are already seeing across-the-board declines in profitability and market capitalization (ask Robert Monks); they can be brought down by Schumpeter’s process of “Creative Destruction”.”

 

Hello world! What does wbos mean on Twitter or Google+?

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I quote:

“Short for #WeBuildOurSociety, it’s a tag deliberately created to remind us of the personal roles each of us–as members of a shared society–can play in acting productively to repair and revitalize what many see as an unhealthy, eroding civil society. We cannot leave our problems simply to ‘government’ or to others.”

 http://tagdef.com/wbos

Try a #WBOS Twitter search:   https://twitter.com/search/wbos

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