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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.


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.

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)


Watch "The Corporation" documentary Free,


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Corporations back then...

were not illegal in the US. But they were considered creatures of government for government purposes for short term charters to build infrastructure or short term charters to provide goods and services locally in the absence of and/or until a non-corporate provider was established.

~wobbles but doesn't fall down~

Youre right, it used to say "essentially Illegal" but

I shortened it, partly to take up less space in the "top Recent Topics" column.

"Essentially illegal" makes

"Essentially illegal" makes no difference. Your description shows corporations to have been essentially and strictly legal.

OMG LOL Does it matter THAT much!?

Essentially Illegal ...and I could have added "without congressional approval"

It works either way though... Here's the definition and synonyms of "essentially"


as you can read above I was trying to be concise and limit the words in the title.

Yes, it does.

Just as Velveeta has softened throughout his comments to this post by making the distinction between "corporation" and "business", so too is an important distinction between legal, illegal, and non-legal. I would drop it if it weren't highly pertinent here. You have it 180 degrees backward. A corporation today is the same as it was prior to 1819 in that it is ENTIRELY a legal designation.

Quite right.

Taking on the Corporations topic, Check.

This is good. I'm glad people are finally waking up to the corruption that is allowed simply by the current structure of our corporation.

Now, we just need to tackle the topic of the banker driven stock market whose hidden purpose is to wield control and robbery over the corporations.

NOTHING at all says a local business can't collect investment locally and still grow to a global size while maintaining it's ethical accountability. Not to mention, they're ALWAYS more cost efficient.

Locally owned businesses and locally gathered investments for the win.

Government is a

Government is a corporation.

The first "pilgrims" were actually corporate employees


Another interesting fact is that church was *mandatory* in Jamestown

with no competition

Their competition is freedom.

Their competition is freedom.


Localism's last lesson of history is about "corporate persons"

"But why is a corporation formed? A corporation is formed so that individuals can act together, greatly increasing their power, in a way that legally limits the liability for any negative outcomes of their behavior. Both these consequences of incorporation, increased power and reduced accountability for their actions, will tend to make them more prone to corruption and more dangerous than a single individual would be on his or her own. The whole idea of the government artificially limiting the liability for one’s joint actions creates a moral hazard." - from "Localism, A Philosophy of Government http://www.barnesandnoble.com/w/localism-a-philosophy-of-gov...

Localism is for people who can still sleep at night even though somebody they don't know in a city they have never been is doing things differently. ("Localism, A Philosophy of Government" on Amazon for Kindle or Barnes and Noble ebook websites)

Show me ANY jurisdiction ...

... where the statues allow owners or managers to get away with ANYTHING and not be held accountable.

ALL jurisdictions, even those with "good" corporate laws for the owners and managers, will NOT allow managers to go scott-free when they commit torts (crimes).

The ONLY people who get away with that are people who are POLITCALLY-CONNECTED -- and that does not matter if they are incorporated or not, or where.

How many individual persons are too big to fail?

And too big to prosecute? Not many. Now ask how many corporations have that status? A LOT more. There is a very strong correlation between how big an individual entity or individual is and how connected they are and how many people's interests would be hurt if they went down. While in theory the two problems are separate, in reality they are connected.

US Prosecutor says that large financial institutions are too big to prosecute (when guilty of laundering billions of drug money from muderers) http://www.bloomberg.com/news/2013-02-03/who-decided-u-s-meg... I realize that this is slightly different from your point about the way the laws are written. They are written by the big corps (as when credit card companies re-wrote our bankruptcy laws a few years back) but they are also enforced unequally even when OK. That is what the prosecutor is saying in the above link. It would cause too much economic disruption to prosecute them.

"I think the entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against Institution A, and as a result of bringing that case, there’s some huge economic effect -- if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly -- it’s a factor we need to know and understand" said Prosecutor Bruer.

Between the LIBOR scandal, the Linda Green Mortgage fraud and others, we know that the law is not enforced fairly when too many big players are violating it. They get token fines, the AG's in almost every state rush to sign them to a token fine so they can't be sued again, and the looting goes on. Is it because they are too politically connected to fail or too interconnected economically? Those two are impossible to separate when you have companies that size with the ability to create money out of thin air trading derivatives ten times the size of global GDP.

At some point, increased size does not help a company service its customers better, but it does help them lobby government more efficiently. I don't want to dive into the details here, they are scattered over four or five chapters, but Localism learns the lessons of history.

Localism is for people who can still sleep at night even though somebody they don't know in a city they have never been is doing things differently. ("Localism, A Philosophy of Government" on Amazon for Kindle or Barnes and Noble ebook websites)

Corporation is just a legal instrument

and is needed, as you said, to represent the owners as a single entity, but also for the formation of CAPITAL - personal savings, bank loans, issuing different types of stock. When the number of owners goes beyond a dozen people, simplistic rationalizations of pre-capitalist era do not apply.

Localism would not ban corporations

but it would put limits on them so they could still perform their positive functions, while greatly limiting negative outcomes. I know some people rail against restrictions, but corporations are not people - they are a creation of law and government. If people want the advantages of incorporation, they should be willing to take more restrictions when acting in that capacity. The restrictions are mostly to keep them from shifting costs, using their government-granted extra powers to lobby the government instead of serve customers, etc..

Localism is for people who can still sleep at night even though somebody they don't know in a city they have never been is doing things differently. ("Localism, A Philosophy of Government" on Amazon for Kindle or Barnes and Noble ebook websites)


Principals of a company can sign contracts with each other to accomplish all those things. Why do they need to sign a contract with Govt???

~wobbles but doesn't fall down~

You are not mentally focused

Owners can indeed sign contracts with each other even if there are ten thousand of them (foreign and domestic.) The question remains - whom a lending bank would sign its contract with?

The partnership

Would be the entity. The difference from a corp is that all partners are responsible for any liability in full, leaving no moral hazard.

You think in simplistic terms

Partnership is only one type of corporations. People who are not rich and cannot afford to chip in big bucks, need CAPITAL to start a mass production. Your thinking is okay for a bookstore owner or a repairman, but not for a large scale enterprise. Without stocks, large capital is difficult or impossible to raise. Stocks do not allow for unlimited or personal liabilty. Such thought is not entertained because it does not work. You just need to strain your mental abilities a bit to understand why. Anarchists are not mentally focused.

Your dog is ugly...

therefore your point is invalid.

The bank's legal staff would inspect the joint contract signed between the individuals and then assess the viability of their business operations and any collateral. No contract with govt (corporation) needed.

~wobbles but doesn't fall down~

Corporation is in fact

a joint contract - agreement to represent the interests of a private group of shareholders with initial capital allocated as the owners innitially decided. Private corporations are PRIVATE entities. Making contract with a private corporation is not the same as making contract with the government. You type a lot, but NEVER made any sense so far. If the lending private bank is not a corporation, who will sign agreement between 1) lender=joint agreement of lenders and 2) borrower= joint corporate agreement of borrowers?

Dude or dudette...

If you want to form a "private corporation" you march down to your state office or branch of the secretary of state for that state and fill out and file "articles of incorporation". It's not just for "public corporations" that wish to issue stock. Both private and public corporations are legal fictions (persons) created by charter/contract with the government.

You asked:

"If the lending private bank is not a corporation, who will sign agreement between 1) lender=joint agreement of lenders and 2) borrower= joint corporate agreement of borrowers?"

The contracts between individuals that make up any joint partnership (including banks) would detail which partners and how many would need to sign and how new partners would be integrated into or removed from the joint partnership contract scheme.

~wobbles but doesn't fall down~

I do not agree

with any of your arguments. But we cannot go on for ever. We just have to agree to disagree.

Because they can't sign a contract with everybody

If you owned stock in McDonald's and somebody sued over hot coffee, then YOU COULD LOSE EVERYTHING YOU HAVE, even though you had NOTHING TO DO WITH IT ... if there were no limited liability to the investors.

Jefferson said "Merchants Have No Country"

Another quote from "Localism, A Philosophy of Government" and then it is back to work....

"Add to it that the largest corporations in this day are global, not merely national, corporations. If a flesh-and-blood merchant’s attachment is to their means of gain more than the spot on which they stand, how much less then is that attachment if they are not flesh but rather an artificial construct found in many spots and many nations? Is it not clear that when corporations whose interests are global control your media and political system then your government will become increasingly global in affection despite the fervent desire of the citizens to retain national sovereignty?

We have learned that when measures are not taken to prevent it, corporate interests can swallow up the interests of individual citizens, localities, and even nations. Where their political influence is unfettered, the nation cannot but be subsumed into a global combine. Let us then consider what must be done to preserve the liberty of individuals, localities, states and nations from the post-constitution threat of global corporations capturing governments

Localism is for people who can still sleep at night even though somebody they don't know in a city they have never been is doing things differently. ("Localism, A Philosophy of Government" on Amazon for Kindle or Barnes and Noble ebook websites)

Awesome! Thanks for the

Awesome! Thanks for the share, gonna check that book out!

this is an important subject

Here is some reading:

the classic essay by Michael Hoy of Loompanics:

another one by Tom Mullen:

here is a pro-corporation view from Kinsella:

Haven't listened to this yet, but this talk by Peter Klein sounds interesting:

Peter Klein has done some interesting work on the size of firms and efficiency. His basic view is that the larger a firm gets, the more inefficient it becomes, because it engages in more internal transactions. The more internal a transaction becomes, the less accurately it can be accounted for in terms of market price, since it becomes harder to compare the transaction to an equivalent market transaction. This explains why large corporations are only able to stay competitive by lobbying for regulation that forces out smaller competitors.

“Although it was the middle of winter, I finally realized that, within me, summer was inextinguishable.” — Albert Camus

On your last point about big being inefficient ...

... some economists have identified exactly WHY big government controlling an economy can never work out.

It's called the lack of a "pricing mechanism." When the Soviet Union had bread lines, it was because the politburo had no idea what a loaf of bread should cost, what distribution should cost, what farming costs should be, etc.

In American health care today, the federal government has dominated health care PRICING for at least 30 years. What happens is that some bureaucrat decides that "Procedure X" should only cost $700 instead of $1,000. How do they know? They DO NOT KNOW. They are pulling these numbers out of their a** -- just like the Soviets did. But it has a HUGE effect because doctors and hospitals operate in the real world, not fantasyland. So, they have to drive the costs up for everyone else to make up for what they lose to Medicare bureaucrats.

It is the lack of pricing mechanism that makes it literally IMPOSSIBLE for government to EVER be efficient. Even with smart people in government (which is rare), or smart business people in government (even more rare), and even the best of intentions (almost non-existent in government), it can STILL never be efficient.

When it comes to BIG business, the same becomes true, but not as dramatic. There is still a pricing mechanism in big business -- but NOT WHEN THEY GET MONOPOLIES AND OLIGOPOLIES.

Do you pay what you "should" be paying for phone service? How do you know? We have NO IDEA how cheap or great phones could be in a FREE MARKET because the current system was GRANTED BY GOVERNMENT to a few companies.

So, these big companies, in order to KEEP OUT COMPETITION that would be able to do it better and cheaper, MUST resort to government privilege in order to survive. It is up to the rest of us to put a stop to it.

One last point -- the worst situation is when big business gets exclusive contracts with the government. In those cases, you can be sure that insider's pockets get lined with bloated payments, such as the well-known $8,000 hammer sold to the Air Force.

It is CRONYISM that is the problem, and not capitalism.