Mike Hoy: Why Corporations Are Not People

Libertarianism is a philosophy based on individual rights. It recognizes that the individual is the fundamental unit of society, and that society is better off if individual people can act in their own benefit. Laissez faire economics (literally "hands off" -- meaning the government) is derived from individual rights. Free individuals making whatever voluntary exchanges they want with each other will result in a free and prosperous society. Individual freedom is the basis of the United States of America. It is what our "Founding Fathers" risked their lives, their fortunes, and their sacred honor, to create. News & Views for Anarchists & Activists:
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Why Corporations Are Not People,
And The Unsavory Consequences
of Pretending That They Are
by Mike Hoy

A Challenge to "Libertarians"

Libertarianism is a philosophy based on individual rights.
It recognizes that the individual is the fundamental unit of
society, and that society is better off if individual people
can act in their own benefit. Laissez faire economics
(literally "hands off" -- meaning the government) is derived
from individual rights. Free individuals making whatever
voluntary exchanges they want with each other will result in
a free and prosperous society. Individual freedom is the
basis of the United States of America. It is what our
"Founding Fathers" risked their lives, their fortunes, and
their sacred honor, to create.

Libertarianism is a philosophy based on individual rights.

But what happens if *groups* of people, i.e., collectivist
entities, form together for the purpose of getting the
government to grant unearned special privileges to them? How
will this affect the marketplace? Well, this has actually
happened in America, and the result is that these
collectivist entities with their government-bestowed
privileges have taken over our economy, in some particular
cases to the benefit of some particular individuals, but to
the overall detriment to individuals in general. These
collectivist entities are known as "corporations," and it is
initially puzzling as to why they are lionized by
"Libertarians," who proclaim themselves the defenders of
*individual* rights.

By deliberately obscuring the boundaries between individuals
and corporations, "Libertarians" have caused themselves to
treat corporations as if they *were* individuals, thereby
assisting in the corporate takeover of America, and the
McDonaldization of practically everything and practically
everyplace, all over the globe -- "Globalization."

Plainly put, corporations are anti-American. They are
anti-individual. The word "corporation" does not appear in
our Constitution.

Plainly put, corporations are anti-American. They are
anti-individual. The word "corporation" does not appear in
our Constitution. Large institutions of all kinds (both
government and business) were suspect in colonial and early
America. In fact, the Boston Tea Party was not a protest
against taxes, but direct action taken against the East
India Company, which represented the commercial interests of
the British elite.

It was not until 1886, after a series of cases brought by
lawyers representing the expanding railroad interests, that
the Supreme Court ruled that corporations were "persons" and
entitled to the same rights (actually more) granted to
*individual people* under the Bill of Rights. This sinister
ruling, discussed by Thom Hartmann in his 2002 book Unequal
Protection: The Rise of Corporate Dominance and The Theft of
Human Rights (Rodale Press) has led to the corporate
dominance of the individual -- a thoroughly un-American
state of affairs. As Hartmann points out, the largest
transnational corporations fill a role today that has
historically been filled by kings. They control most of the
world's wealth and exert power over the lives of most of the
world's citizens. And they pretty much own the U.S.
government: the revolving door between corporate boardrooms
and the top echelons of all recent administrations is no secret.

Why are "Libertarians," self-styled promoters of
*individual* rights and interests, such mindless boosters of
corporations?

But why, then, are "Libertarians," self-styled promoters of
*individual* rights and interests, such mindless boosters of
corporations? Why in the world do "Libertarians" vehemently
insist that corporations are *market* entities, when even a
cursory examination of the matter reveals that they are
actually *government* entities?

I'll say it again: corporations are not *market* entities --
they are *government* entities. This was proven by the
libertarian/objectivist Robert Hessen in his 1979 book,
ironically titled In Defense of The Corporation (Hoover
Institution). This is a very funny book, because he states
in his prologue: "In this book, the belief that corporations
require government permission to exist and that they are the
recipients of special privileges will be challenged. I will
present an alternative known as the 'inherence theory':
i.e., corporations are created and sustained entirely by
exercise of individual rights, specifically freedom of
association and freedom of contract."

Now, the essential distinguishing characteristic of the
corporate form of enterprise is limited liability for torts.
If Hessen (or anybody else) is going to show that
corporations are contractual entities, he is going to have
to demonstrate that limited liability for torts can be fully
accounted for as resulting from voluntary agreements between
consenting individuals. Here is where Hessen then proves the
exact opposite of what he said he was going to prove. He
openly admits that limited liability for torts *cannot* be a
part of the market order! He says:

"Thus far, the inherence theory -- the idea that corporate
features are created by contract -- has been applied to
entity status, perpetual duration, and limited liability for
debts. But how can limited liability for torts be explained
by a contractual theory, since tort victims do not consent
to limit their claims to the assets of the corporation?
Surely, limited liability for torts would seem to be a
state-created privilege. . . .

"How, if at all, can limited liability for torts be
integrated into a *contractual* theory of corporations? The
answer is that it can't . . . either limited liability for
torts is a state-created privilege or it is contractual
(which it obviously is not)."

So there, by the time the guy is only on page 19, he has
already admitted that he cannot do what he said he was going
to do: show that corporations are the result of voluntary
agreements between individuals. He then adds: "Regardless of
one's view about limited liability for torts, the whole
issue is irrelevant to giant corporations, which either
carry substantial liability insurance or possess sizable net
assets from which claims can be paid." (You know, like Enron.)

So after admitting in the first 19 pages In Defense of The
Corporation that the essential distinguishing characteristic
of corporations (limited liability for torts) cannot result
from market forces, he then red herrings away for another
120 pages or so, mostly bashing Ralph Nader (big deal). This
book was praised by such libertarian/objectivist luminaries
as F.A. Hayek, David Kelley and D.T. Armentano. It is not
some obscure lunatic fringe screed that nobody ever heard
of. Those are some libertarian heavy hitters there.

Managers of corporations have more in common, as a class,
with government bureaucrats than they do with individual
entrepreneurs.

I wonder how many rank-and-file "Libertarians" are aware of
this. Reading "Libertarian" propaganda indicates either that
they are unaware of the statist *nature* of corporations, or
are deliberately avoiding the issue. They *always* write as
if corporations are the *same* as individuals. In fact,
because of the separation of "ownership" and control,
managers of corporations have more in common, as a class,
with government bureaucrats than they do with individuals.

The corporate *form* of enterprise encourages short-term
thinking. Instead of thinking how to preserve and maximize
the benefits of the assets under their control for, say, the
next thirty years, the corporate manager is concerned with
beefing up the bookkeeping profits on a quarterly basis --
just look at how many giant corporations in the last few
years have had to "readjust" past "earnings," and take
"charges" against current "earnings" for manipulative
accounting.

In their book Natural Resources: Bureaucratic Myths and
Environmental Management (Pacific Institute, 1983),
libertarians Richard L. Stroup and John Baden state: "The
appropriate focus in analyzing public sector behavior is the
individual decision maker. It is the individual bureaucrat,
the professional public servant, who makes most of the
decisions about governmental operations." . . . "Salary,
position in the bureaucracy, amount of discretionary budget
control, workplace amenities, and office perquisites all
contribute to the bureaucrat's well-being. If an agency is
expanding its budget and authority, these components of the
bureaucrat's welfare improve also. On the other hand, a
decrease in the agency's size and budget are generally
accompanied by fewer benefits to the bureaucrat. Thus,
bureaucrats face strong incentives to increase their
agencies' authority and areas of responsibility."

*Exactly. Very well put.* That is why governments are so
inefficient, and why the bigger the government, the more
inefficient it is. *Excellent point, libertarians.*

But these highly educated libertarians fail to point out
that exactly the same thing is true of corporate managers --
and that if "the appropriate focus in analyzing public
sector behavior is the individual decision maker," then the
appropriate focus in analyzing corporate behavior is the
individual corporate bureaucrat -- and he, like his
government counterpart, faces strong incentives to thinking
the short run.

Stroup and Baden say, "Unconstrained by the need to generate
profits, bureaucrats may ignore or exaggerate the economic
efficiency of the projects they administer." True, but so is
this: *Constrained by the need to generate the appearance of
profits every quarter, corporate bureaucrats may ignore or
exaggerate the economic efficiency of the projects they
administer*. Precisely because they are entities which
literally cannot exist without a special privilege granted
by the government, virtually any criticism "Libertarians"
make of government, could also be made of corporations --
but "Libertarians" do not do this. Why?

"Libertarians" stick the "Market" label on corporations and
then respond to the label as if it were the thing.

Well, "Libertarians" are obsessed with *labels*. The thing
that distinguishes "Libertarian" analysis is their
State/Market dichotomy. All the major "Libertarian"
propaganda outlets are *non-profit* organizations. That is,
they have gone to the government and asked to be exempt from
the forces of the marketplace. You would think that a bunch
of people who according to themselves understand economics
and the marketplace better than anyone else on Earth would
be able to manage to, say, publish a newsletter without
losing money, but the "Libertarians" won't even have a go at it.

Since "Libertarians" avoid the marketplace like the plague,
how, then, are they to be "for" the "Market" and "against"
the "Government?" Answer: they sit on the sidelines and
*root* for the "Market," like fans rooting for a major
league baseball team. Since the actual marketplace (food
co-ops, mom & pop groceries, auto repair shops, etc.) isn't
very glamorous, (you hardly ever see it on TV)
"Libertarians" stick the "Market" *label* on prominent
non-market entities (corporations) and then respond to the
label as if it were the thing.

Thus, we see "Libertarians" rooting for corporations, and
that is how they reconcile their State/Market dichotomy with
reality. But, as Robert Hessen demonstrated in In Defense of
The Corporation, corporations actually belong on the
*government* side of that dichotomy. "Libertarian" followers
have been taught numerous thought-stopping techniques by
"Libertarian" leaders, so that anyone who attempts to
discuss the non-market reality of corporations is slapped
with a negative label ("anti-corporate," "anti-trade," etc.
-- there are lots), and then any questions raised by that
person are literally unthinkable to "Libertarians."

"Libertarian" leaders use an intellectual sleight-of-hand to
get "Libertarian" followers to cheer for corporations. They
present their pro-corporate (i.e., pro-government entity)
blather *as if they are talking about individuals*. Let's
look at a real-world example. Here is a blurb for the book
Why Globalization Works by Martin Wolf from the Laissez
Faire book catalog: "The foes of international buying and
selling don't like to admit that if it's bad for a New York
grocer to trade with a Timbuktu grocer, it's also bad for
the New Yorker to trade with a New Jerseyite. Or that the
end-of-the-line of such anti-market logic requires you to
survive on what you can grow in your backyard, without ever
trading your turnips for your neighbor's corn."

Notice the use of thought-stopping labels ("foes of . . .
buying and selling," "anti-market"), and the false
assumption that what is going on with "Globalization" is "a
New York grocer" "trading with" "a Timbuktu grocer." No
particular person who allegedly holds these views is named.
It is implied that everyone who questions whether
"Globalization" is actually a good thing is such a dirty
rotten busybody that he would try to stop you from "trading
your turnips for your neighbor's corn."

Now, I have read some books questioning "Globalization," and
I cannot recall a single author who is opposed to an
*individual* in "New York" trading with any *individual*
anywhere else. Since the questioners of "Globalization" have
never made any statement even resembling this, why do
"Libertarians" pull the wool over their own eyes and pretend
that anyone who doesn't swallow "Globalization" as willingly
as they do is against *individuals* trading with *individuals*?

As far as I can figure out, it is because they have been
trained to insert the State/Market dichotomy into their
minds as their fundamental grid for perceiving reality. All
incoming signals from the outside universe must be filtered
through the State/Market dichotomy, and the State/Market
dichotomy of the "Libertarians" has been doctored so that
corporations are on the "Market" side, when even prominent
libertarians have confessed that they belong on the "State"
side.

The recently released book Confessions of an Economic Hit
Man: The Inside Story of How America Built an Empire on
Third-World Debt, by John Perkins, reveals what
"Globalization" is really all about -- and it ain't "a New
York grocer" "trading" with another individual. The
publisher's blurb for the book states that for years John
Perkins "worked for an international consulting firm where
his job was to convince underdeveloped countries to accept
enormous loans, much larger than what was really needed, for
infrastructure development -- and to make sure that the
development projects were then contracted to U.S.
multinationals. Once these countries were saddled with huge
debts, the American government and the international aid
agencies allied with it were able, by dictating repayment
terms, to essentially control their economies." Gee, I don't
see where "a New York grocer" figures into it, do you?

Contrary to "Libertarian"-spewed horseshit, "Globalization"
is not Joe Doakes, New York grocer trading his turnips for
the corm of Sam Smith, Timbuktu grocer.

And speaking of "the American government and the
*international aid agencies allied with it*," (emphasis
mine), Martin Wolf, author of Why Globalization Works is
described as "a former senior economist at the World Bank."
Contrary to "Libertarian"-spewed horseshit, "Globalization"
is *not* Joe Doakes, "New York grocer" trading his turnips
for the corn of Sam Smith, "Timbuktu grocer."

It takes some heavy-duty thought-stopping and unending
label-slapping to pretend that it is. If the "Libertarians"
are so right about "Globalization," and other people are so
wrong, then why do "Libertarians" find it necessary to
deliberately misrepresent opposing views? Why can't they
deal with something somebody actually said, instead of
pretending that anyone who questions their
corporatation-promoting is against individual trade? And why
are the "Libertarian" rank-and-file so eager to choke these
falsehoods down?

It is long past time that "Libertarians" wake up and admit
that corporations are not individual people, and that there
is nothing in libertarianism that calls for pretending that
they are, let alone preferring them over individuals.

So, what is to be done? Damned if I know. I don't have any
platform or program, except to honestly admit that
corporations are not people, and that it is as insane to
pretend they are as it is to pretend that a coat hanger is a
vacuum cleaner. It is "Libertarians," the self-styled
defenders of individual rights who ought to be taking the
lead in formulating "what is to be done."

Most of the books pointing out the just plain *wrongness* of
pretending that corporations are "persons" are written by
people who are considered to be on the "Left" politically.
And their "solutions" to corporate dominance of the
individual are so naïve as to be almost frightening -- they
seem to honestly believe that somehow "government" (the same
government that is owned by corporations) can pass laws that
will restore corporations to whatever proper place they
might have in a society based on individual rights. They
seem to be blissfully(?) unaware of what the
Marxist-oriented writer Gabriel Kolko demonstrated in his
1967 book The Triumph of Conservatism: that government
regulatory bodies *inevitably* become controlled by the very
industries that they are supposed to be "regulating."

I maintain that it is up to "Libertarians" to take the lead
in questioning the corporate form of enterprise, and come up
with "solutions" to restore economic power in America to its
rightful practitioners: *individual people*.

I maintain that it is up to "Libertarians" to take the lead
in questioning the corporate form of enterprise, and come up
with "solutions" to restore economic power in America to its
rightful practitioners: *individual people*.

So how about it, "Libertarians?"