63 votes

Why Were Corporations Illegal Before 1819?

While many here believe that Corporations are part of a healthy Free Market, it should be noted that our founders fought the British Corporations AS WELL AS the British Government.

So when you think it's "libertarian" to defend corporations like Monsanto, think again.

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When American colonists declared independence from England in 1776, they also freed themselves from control by English corporations that extracted their wealth and dominated trade. After fighting a revolution to end this exploitation, our country's founders retained a healthy fear of corporate power and wisely limited corporations exclusively to a business role. Corporations were forbidden from attempting to influence elections, public policy, and other realms of civic society.

Initially, the privilege of incorporation was granted selectively to enable activities that benefited the public, such as construction of roads or canals. Enabling shareholders to profit was seen as a means to that end.

The states also imposed conditions (some of which remain on the books, though unused) like these:

* Corporate charters (licenses to exist) were granted for a limited time and could be revoked promptly for violating laws.

* Corporations were often terminated if they caused public harm.

* Owners and managers were responsible for criminal acts committed on the job.

* Corporations could not make any political or charitable contributions nor spend money to influence law-making.

http://www.reclaimdemocra...
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But aren't corporations just part of the free market? Isn't that what capitalism is all about - corporate interests driving the economy?

Actually, no. Corporate libertarians would have you believe that somehow corporate dominance is entirely consistent with the values and vision of the Founding Fathers, but this is pure myth. The framers believed in limited government and free markets, but corporations were almost non-existent in the early days of the Republic. Unlike today, one could not form a corporation simply by filing a few papers with a government office; instead, permission from the government was needed (usually via an act of the Legislature)

http://www.psychologytoda...
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UPDATE:

Watch "The Corporation" documentary Free,

http://youtu.be/Y888wVY5hzw



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wolfe's picture

It is irrational to believe...

That anything should exist which can't be controlled by it's creators.

Collectivism says that the rights of the group outweigh the rights of the individual. That a group, therefore, has more power or authority than the individual.

Corporations, granted special rights as an entity, by the government, is the purest form of collectivism.

A moral hazard allows people to operate outside the bounds of sanity, wreaking havoc, usually discussed in regards to economics.

The special privileges granted by the government, are in fact one of the most obvious moral hazards to ever exist.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

I honestly have a hard time

I honestly have a hard time believing you have ever owned a business.

wolfe's picture

And I honestly have a hard time believing you...

are taking any time to understand the concepts at hand.

If you are genuinely interested in learning, I can go into the details of the argument. But that would require you take a moment to form good questions, or make arguments to refute what I have said.

I do not base my arguments on the "weight" of my "expertise" in the area, but on logic. I only even mentioned it because you made a claim about me, personally, that was ridiculous and untrue.

Oh, and if you have ever been to NYC, you are likely to have been screened by my software while passing through a number of the large office buildings. Or a number of hospitals nationally.

If you are wearing Levi's or a number of other products, or have had anything sourced from the US, it is likely that your goods passed through some of my software.

If you have ever dealt with a credit union, or mid size bank, it is likely your account was managed by some of my software.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

If all of this is true then

If all of this is true then you, more than most people, should comprehend the value of a corporation or LLC to enable you to both limit your liability and enable widespread adoption of your software or services by large companies. I think it would be helpful for you to narrow your definition of "corporation" or perhaps explain in greater detail your understanding of how businesses actually function outside of an idealized fictitious business environment free from lawsuits, intellectual property disagreements and other such real-world issues.

wolfe's picture

What it means is...

That I am intimately familiar with how corporations rape customers, employees, the environment as the product of them just doing business. And I understand the legal protections very well. They actually allow a person to commit fraud legally and effectively get away with it.

These are the definitions:
http://www.dailypaul.com/242191#comment-2947451

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

Is your beef with

Is your beef with "corporations" in general traceable to software development you may have performed as a temp or at-will employee, in which you may have crafted some elegant or efficient code which proved very valuable for the employer for which you either felt you were inadequately compensated or your work went unrecognized?

I think I am beginning to understand where your philosophical hatred of business in general may stem from events which made you feel powerless.

Am I there yet?

wolfe's picture

Not even close.

But if you would like to understand, do some research, ask some questions, and actually try to learn something.

I have no beef with companies, or businesses, even/especially large ones.

A "corporation" is a government construct which provides special benefits and creates a significant moral hazard in the market place.

Now, if you want to continue being a douchebag, I will start calling you such. Or you can have a reasoned discussion, your choice.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

If you could stay on point and

If you could stay on point and answer queries that would be just awesome. I'm not the one lobbing ill-conceived logic bombs at business owners.

wolfe's picture

I never once said ANYTHING about...

a business owner.

You really don't read my statements before commenting, do you?

And my logic, is just that, logic. If you can find a hole, feel free to point it out. Simply stating there is one, without pointing it out, is well...

In addition, you have not asked a single question. I am not going to "guess" at what your questions are. If you have them, state them.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

Let me be more direct. 1) Are

Let me be more direct.

1) Are you now or have you ever been a Democrat?

2) Are you now or have you ever been a Canadian?

3) Are you now or have you ever been a Socialist?

wolfe's picture

lol...

You REALLY don't read what I say!

Is there any point in me even communicating with you?

For the record, I am an anarchist. Some would give me the label ancap, however, I dislike qualifying the word anarchist with anything.

I have spent my life fighting socialism and all forms of collectivism.

I'll answer my own question as well. No, there is no point in communicating with someone who apparently would prefer to use thinly veiled ad homs as questions and refuses to carry on a legitimate discussion.

If you decide at some point to behave in a more mature way, feel free to restart the conversation.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

OK, at least now I know that

OK, at least now I know that you are an anarcho-capitalist. I can understand and respect that view to a degree.

Can we both agree that we are opposed to corporatism?

wolfe's picture

yes....

and yes... will go into detail later... wish I could talk now that the conversation has gotten civil... lol

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

Can this continuance be done on page one so it's easier

to find the "new" comments. I see 19 new ones with only one on page one and when I go to page 2, none are labeled new anymore. Thnx.

Question

Whose rights are being violated by the existence of corporations? Why should private property owners not be allowed to form a corporation? Should partnerships and other forms of joint property also be prohibited?

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

The first corporations were created to build things too big for

The first corporations were created to build things too big for individuals... giant bridges and such.

As corporations began competing more and more for smaller jobs and laborers the protections became counter productive... forcing the need for licensing... which in turn corporations decided to lobby for licensing of their main competition also... sole proprietors who now had to obtain both licensing and incorporate so not to put their entire worth on the line.

Corporations and their industry lobbyists are constantly pushing the heavy hand of government on their unincorporated competition.

.

Licensing is a whole other topic that needs to just go away!

I'm convinced that this originated at the banks as well but I have no research showing it. It does, however, make sense in the same manner as how they externally control corporate activity.

I've always wondered why it takes 2 years to learn how to cut hair and if you break the rules (like giving a haircut in a nursing home), you lose your license and are subject to stiff fines or cages.

I personally like the electrician path (sans the government sanctions). A system where entry level workers can do small stuff until they're trusted (an apprenticeship) and then moving on to Journeyman, etc. This could even be the path for nurses to become doctors.

wolfe's picture

You, like many are confused on the subject...

People can get together all that they want to start a business.

However, a corporation is a government construct, that shields people from the results of their own behavior and provides special privilege.

Without government interference, there could be no corporation, because the definition of a corporation is government interference in the marketplace.

Corporation does not mean business, and vice versa. Nor does a huge business need to be a corporation to be successful and viable.

Anything that conveys "special rights" should be prohibited. Partnerships and sole proprietorships do not convey special rights and so there is nothing wrong with them.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

Strawman Argument

You're not criticizing corporations as such, you're criticizing corporations that are granted privileges by the State. The proper solution is to prevent the State from granting corporations privileges, not to prohibit corporations.

A corporation sans State-granted privileges is just a voluntary association of property owners (like a partnership, but organized differently), which has limited liability for contractual obligations only, not torts. There is no privilege involved.

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

wolfe's picture

You are incorrect.

The definition of a corporation is as a legal construct concocted by the government. You make the mistake of confusing a corporation with a business.

Limited liability IS a special privilege granted by the government. As well as many other boons.

Otherwise it is simply a business. By your reasoning, why don't we just grant ALL businesses this special status? Why not allow anyone to avoid liability by operating their affairs as a business. Um, because it would be stupid and chaos.

In addition, you misuse the word strawman.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

Wow...

The definition of a corporation is as a legal construct concocted by the government. You make the mistake of confusing a corporation with a business.

When I use the word "corporation," I am referring to a joint-stock company with limited liability. Call that whatever you like, and let's discuss that. I'm not going argue with you about semantics.

Limited liability IS a special privilege granted by the government. As well as many other boons.

No, it isn't. Limited liability is a function of voluntary contracts between the parties concerned. Suppose Bob is meeting with Jones about a loan. Bob agrees to take the loan from Jones on the condition that, in the event he defaults, Jones can't take his house. Thus Bob has limited liability for the debt: i.e. there are limits on what the creditor can take from Bob in the event of default (everything but his house). This is not a "privilege," it's part of the contract voluntary accepted by both parties. It's the same with a corporation. It is part of the voluntary contract between corporation and lender that, in the event of default, liability is limited to the assets of the corporation - the assets of the stockholders are off limits. Again, this is not a privilege, both parties agree to this by contract. If a lender doesn't like contracting on these terms, he's free not to make the loan.

By your reasoning, why don't we just grant ALL businesses this special status? Why not allow anyone to avoid liability by operating their affairs as a business. Um, because it would be stupid and chaos.

No one is "granting" or "allowing" anything. Limited liability is not something bestowed magically from above. It is, as I explained, a matter of the terms of the contract between the parties concerned. As I show in my example, anyone could have limited liability. I could go down to the bank tomorrow and ask for a loan on the condition that they can't take my house if I default. They can accept that condition or not. If they do, then I've got limited liability for that debt. It's really not that complicated.

In addition, you misuse the word strawman.

No. You were pretending to criticize corporations as such, while actually all of your arguments were against government sponsorship of corporations. That's a strawman argument. To be fair, I don't think it was intentional on your part, since you don't underrated the distinction - but it was nonetheless a strawman.

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

wolfe's picture

Either you are willfully ignorant...

Or you deliberately try to confuse the issue as many conservatives incorrectly call corporations businesses.

I have owned two sole props, and 4 corps. I know what I am talking about.

Limited liability is not a voluntary contract because the people who are one the "wronged" side never agreed to anything.

So you must have the same definition of voluntary as the IRS.

Further, in a sole prop, if the company commits a damaging act, the owner pays for it. A corp, there is no such person held accountable, and the company is merely required to "pay a fine".

Here is a brief summary I found real quick since you apparently are too lazy to even google it.

http://www.investorguide.com/article/11573/what-is-a-c-corpo...

And for the record, LLC's are not technically corporations, but if you actually knew what you were talking about, I wouldn't have to tell you that.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

Okay then...

...you persist in your strawman arguments, criticizing the current law regarding corporations, which has nothing to do with what I'm talking about (how a corporation could exist in a free society). Whether you're doing this intentionally or not, I don't think there's any value in continuing the conversation.

There is a substantial literature on the corporation by various libertarian economists and legal theorists. I suggest you browse through www.mises.org and take a look.

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

But even supposing that your

But even supposing that your argument is based on some libertarian utopian definition of a corporation, you still come down to having to define what separates your utopian corporation from an unincorporated business.

In you example, you used a group of business people who make a contract to borrow money for some collateral other than their homes and personal wealth. Presumably, they put up some designated group collateral. That's just a loan agreement between two parties. It says nothing about whether a consumer or employee could sue the group of business people for an amount that exceeds the company's assets and requires liquidation of the involved individuals' homes and other assets.

There's no difference in this scenario between your libertarian corporation and the existing sole proprietorship or partnership.

What special rights are you claiming for you libertarian utopian corporation that differentiates it?

Response

All parties which contract with a limited liability corporation agree to limit the liability of the shareholders to the assets of the corporation - by definition. That's what it means to be a limited liability corporation! As in my example, anyone or any kind of business association can contract ad hoc with other people on the condition of limited liability. What defines limited liability corporation is that everyone who contracts with it always does so on the condition of limited liability. The corporation is set up so that it is not allowed (by its own internal rules established by its owners) to contract with anyone except on the condition of limited liability.

What special rights are you claiming for you libertarian utopian corporation that differentiates it?

None! That's my point! Everyone, and every business association of whatever kind, has the right to contract with people on whatever terms it likes, including on the condition of limited liability - right? If other people don't want to contract with it on those terms, they're free not to. The LLC is merely a business association which always contracts on the condition of limited liability - by definition, that's what makes it an LLC.

As I said before, limited liability applies only to contractual obligations. That is, the only parties who are prevented from going after the personal assets of the shareholders are those who have contractually agreed to be restricted in that way. Limited liability does not apply to torts. That is, if an LLC harms someone or their property, as by (for example) dumping toxic waste into a stream, there is no limited liability, precisely because the victims of this tort did not contractually agree to limited liability.

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

wolfe's picture

Wow...

LLC's, first of all, are not corporations.

Second, the only thing that grant a "default" contract, whether by label, or otherwise is a government.

All real contracts require informed agreement. All parties not only must be aware of the terms, but must prove this by signing an agreement.

"Default" contracts are the territory of the government. In a free society, you cannot state a "default" contract by throwing cute letters after your name. Otherwise, I would be Wolfe RTFM, which would mean all persons speaking with me would be contractually obligated to Read The F'ing Manual.

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

As I said...

...I was using "corporation" to mean a joint-stock company with limited liability: this is what people are generally talking about when they talk about corporations, at least in my experience.

LLC as I used it is a regrettable pleonasm, as a corporation has limited liability by my own definition.

REPEAT: I AM NOT using these terms as they are used in existing law.

But thanks though for another exciting installment of the "let's argue over who's stipulative definitions are correct" show.

All real contracts require informed agreement

Of course. Have I said anything to the contrary?

All parties not only must be aware of the terms, but must prove this by signing an agreement.

Nonsense. An exchange of property titles occurs when an agreement is reached, period. A written document is merely a record showing that an agreement was reached, useful in the event of a future dispute.

In a free society, you cannot state a "default" contract by throwing cute letters after your name.

Who said you could? Not I. I have said over and over again that limited liability is conferred by contract. I never suggested that a firm acquires limited liability for all its dealings by simply changing the name it calls itself. Again, you seem to be obsessing over current law, which has no bearing whatsoever on this discussion. You're attacking the current law re corporations, not what I'm saying - which is why I keep pointing out that you're attacking strawmen.

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

wolfe's picture

We can discuss whatever...

made up words or definitions that you like. But then, well, we would just be having a gibberish conversation.

We are discussing the "current" REAL definition of a corporation.

In your model, if I take you at your word that you are not allowing implied/default contracts, nor are you allowing for limited liability to exceed that which is stipulated specifically in contract, then what you suggest is simply a business, doing business contractually with another business, and has NOTHING/ZIP/ZERO to do with corporations.

For you to use the word corporation, as if it is acceptable is for you to play into the "all businesses are corporations" myth, which allows corporations to shift the argument.

However, I still doubt that you are eliminating default contracts. A contract is well understood agreement between all parties involved. And there is a reason why a contract must have proof in our legal system that understanding and consent were given. Because otherwise, it is a he said/she said chaos. And make no mistake, the record of the understanding is important.

In addition, a non-corporation is perfectly free to generate stock and manage it with investors how they please without corporate status. Your belief that a "corporation" is about stock ownership, is ridiculous. Stock was never the goal, just a convenient way to "track" investment.

But if that is your argument for limited liability than you are wrong. If a third party is harmed (externality), there can be no limited liability enjoyed by anyone who invested in the company. Standard civil/criminal laws and penalties should apply. If the investor was aware of the action, they are personally responsible, and if not, then not.

Hell, the only thing even preventing them from doing a public sale of that stock is the SEC.

Did you RTFM, btw?

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/

LLCs are not the same as a

LLCs are not the same as a corporation, but there are many similarities.

http://www.legalzoom.com/incorporation-guide/corporation-llc...

wolfe's picture

Mises agrees with me...

Cato agrees with you. 'Nuf said.

A corporation cannot exist in a free society because it requires a government to bless it and call it a corporation and bestow special powers.

Otherwise, it's just called a business.

Corporation:
http://dictionary.reference.com/browse/corporation?s=t

"1. an association of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members."

Business:
"3. a person, partnership, or corporation engaged in commerce, manufacturing, or a service; profit-seeking enterprise or concern."

The Philosophy Of Liberty -
http://www.thephilosophyofliberty.com/