A Corporation is a deputy Government.

That was clearer in the precursors to the modern Corporation — the “Companies of Friends” and the like. As I’ve said before, the King couldn’t tax Russian peasants, but the Company of Friends could sell stuff to Russian peasants and the King could tax the Company, or participate directly himself. So the King chartered the Company, and a good time was had by all.

Then came the major innovation: “personhood”. The Company was defined as an entity in and of itself; its members became “share holders”, liable for the debts of the Company (or for legal judgements against it) only to the extent of their holdings. That isn’t true for earlier forms. Members of a partnership are each exposed to full liability for their activities.

That innovation made the Corporation a preferred vehicle for investment. Become a partner, and if the partnership does something foolish your entire fortune is at risk. Buy shares in a limited-liability Corporation and you may lose your investment — the value of your shares — but nothing else is exposed to legal action or bankruptcy. Romance languages use some version of “Anonymous Society” to describe what we call “limited liability” in English, which makes sense. To a person interacting with the Corporation, the shareholders are anonymous; they can’t be reached or made liable beyond their holdings, because the State says so.

Limited liability absolutely requires Government action. There is no way in the common law prior to limited liability under Government charter to protect other, non-Company assets from legal action. It has to be done by Law, by fiat of the Government. A true Libertarian anarchy cannot have Corporations. There is no entity that can use the Sword of the State to impose limited liability.

That doesn’t eliminate the original function of the Corporation, which is to extend the taxing authority of Government to entities and persons not otherwise taxable by that particular Government. There are several States, California prominent among them, that tax the entire income of the worldwide activities of the Corporation — “unitary taxation”. This, of course, means that a Bengladeshi peasant who buys something made by a Corporation that also trades in California pays part of Governor Schwartzenegger’s bar bill. The system also provides a beautiful way to hide the extent of taxation. When a Corporation pays taxes it is a cost of doing business, just like the cost of raw materials or the electricity bill, and ultimately the customers of the Corporation pay all business expenses, or the Corporation has less money and ultimately fails. When you buy a car, or a candy bar, the Corporation that made the item takes part of that money and pays taxes with it, because it has no other place to get money.

No, a Corporation (at least nowadays) doesn’t itself tax. It doesn’t have to. If it needs the Sword of the State for some reason — normally to collect debts — that force is available to it upon request. If Bank of America forecloses on your house, it won’t be an officer of the Corporation who comes to turf you out, it’ll be the local Sheriff. Distinguishing according to taxing authority is facile, but wrong.

The reason the Corporate form took off, once limited liability was in place, is that it is a form of decentralization. There is nothing stopping Government from engaging in the same sort of buying, selling, manufacturing, etc. that the Corporations of the world do. But if all commerce passes through a single entity, what we have is monopoly. The major monopoly capitalists of the late Nineteenth and early Twentieth Century, the Rockefellers and Carnegies, were able to maintain their monopolies because they were able to enlist the State in protecting them. They were inefficient from a societal point of view, and breaking them up produced a positive return. Decentralization works, centralization does not.

Monopoly capitalists can use State power to protect their monopoly because they have a lot of money and power, and can use that money and power to influence the agents of the State to act as they wish. A Government entity — department, “Government Corporation” (FNMA, e.g.) or what have you — is directly part of the Government and can obviously enlist State power to support its monopoly. Monopoly — centralization — is less efficient from a societal point of view than decentralization, distribution of power in smaller units across the society, and production of wealth suffers.

People who are crying out for “public management of assets” are demanding monopoly — asking for a single entity to conduct all the business. We are all capitalists, because we live in an industrial society. “Public ownership” is just a form of monopoly capitalism. It may be a little strange to think of Communists as monopoly capitalists, but that’s what they are (where they aren’t simply suicidal fools).

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