Chad Perrin: SOB

14 June 2009

No Dilemma

Filed under: Cognition,Humor,Liberty,Writing — apotheon @ 03:47

In a Cato @ Liberty article, Gerald P. O’Driscoll raises what he calls A Libertarian Dilemma. In it, he quotes Simon Johnson:

MIT’s Simon Johnson has argued, “Anything that is too big to fail is too big to exist.” He favors breaking these institutions up.

Of course, as O’Driscoll correctly points out, the idea of governmental interference in “private” business (such as breaking up business concerns by authoritarian fiat) is anathema. Thus, the dilemma, which he sets out to solve.

The word “dilemma” comes from the Greek, where “di” means “two” and “lemma” comes from “assumption”. A dilemma, then, is a circumstance of facing two conflicting assumptions. There is, in fact, no dilemma here, however. Both lemmas in this case — that libertarians must simultaneously favor breaking up corporations that have been deemed “too big to fail” to protect economic markets from interfering governmental action and oppose the interference by government implied by forcibly breaking up large corporations — are, in fact, missing the point, the real root of the problem at hand.

The real root of the problem is simply that governmental interference in economic markets by way of corporate law has created legal “persons” that compete for rights protection without actually being people, and that receive immunities and political influence not available to individuals. These advantages (and conflicts with the goal of protecting individual rights) created the “too big to fail” issue in the first place.

It isn’t just that they’re too big to exist — it’s that they should never have existed under their current organizational structures, regardless of size, in the first place. When what amounts to a manila folder full of legal briefs and a set of ledger books is accorded the same “rights” that are Constitutionally guaranteed to individual people under the banner of encouraging “private” sector success, a grotesque perversion of law and market forces is clearly underway.

The solution is to start stripping away the unique legal status of corporations in the first place. I’m open to suggestions for how we can effectively and efficiently work toward such a goal, but I suspect that at this stage the mere act of getting the word out that corporatism itself is antithetical to a free market is the necessary foundation we must lay before building a structure of economic liberty. The mainstream media, politicians, and partisan commentators have equated “corporation” with “business” for so long that, I fear, the task of educating people on the actual incompatibility of corporations with a fair (by which I basically mean “free market”) business environment is almost insurmountable.

Supposed libertarians often scream bloody murder when the subject of dismantling corporate law (and thus the institution of the legally recognized corporation itself) comes up, spuriously asserting that anyone who would say such a thing is a communist, socialist, or other anticapitalist. Supposed libertarians actually end up defending what amounts to fascist economic policy (by literal definition, rather than mere connotative insult) against true free market policy.

It’s probably worth examining the meaning of the term “capitalist” and how it fits into the grander scheme of economic things in the attempt to understand this problem.

  • Back in the early days of economics as an academic discipline, Adam Smith referred to an economic policy he called “economic individualism”. Note that I’m getting this second-hand, from a number of sources such as The Concise Encyclopedia of Economics and Wikipedia; I have not actually read Smith’s seminal economic work, The Wealth of Nations, yet.

  • Economic individualism was in effect both the original term for a free market economic school of thought and the first academic economic school of thought. As Wikipedia puts it (though The Concise Encyclopedia of Economics gives a much more detailed account):

    The doctrine of economic individualism holds that each individual should be allowed autonomy in making his or her own economic decisions as opposed to those decisions being made by the state, or the community, for him or her.

  • Karl Marx, in laying the groundwork for orthodox socialist “thought” for centuries to come, essentially coined the word “capitalist” as a reproachful epithet, lumping together all manner of people who advocated for economic systems that allow for recognition of nongovernmental property. The term “capitalist”, in short, arose as a dire insult to those who support the concept of ownership — a key requirement of mainstream free market economic schools of thought. It is in effect a statement that all economic individualists care about is money itself, ignoring the fact that money is actually a technological advance that improves opportunities for productivity in a manner analogous to that of the invention of agriculture.

  • Ironically, those who should have come to be known around the world as “economic individualists” have instead chosen to wear the yellow badge of the “capitalist” label. It has become such a widely accepted term that would- or should-be economic individualists call themselves capitalists without irony, and do not take it as an insult when an economic collectivist sneeringly uses the word.

  • Perhaps as part of that adoption of the term “capitalism”, and abandonment of the term “economic individualism”, many would- or should-be economic individualists too easily forget the individual factor of economics — the single most important part of economics. Corporations are collective “persons”, entirely incompatible with an individualist economic policy, and require government interference in economic markets for their very legal existence, but far too many self-described capitalists and libertarians never even notice this basic contradiction in their support for nominally free market capitalist economic policy.

With that in mind — how can we come to any conclusion other than that a market correction for all the externalities created by corporate law has been far too long in coming?

Steps in this direction would inevitably bring about the dismantling of major corporations. Doing so would solve the supposed libertarian dilemma illuminated by O’Driscoll, by seeing that any organization too big to fail (and thus too big to be allowed to exist) naturally comes apart at the seams. Reorganizational efforts by those with a vested financial interest in the continued success of the surviving components of a previously extant “public” corporation would surely lead to an orderly devolvement from capitalist collectivism to a state of entrepreneurial individualism.

People call for forcibly dismantling these financial empires, but no force is needed. Simply remove the application of force that allows them to legally exist at all a little at a time, and watch them divide themselves into separate (but coöperative, one hopes) business concerns. If we accept the idea that libertarianism requires a free market approach to economics (which we must, if we are to accept market economics at all), we are left with the inescapable conclusion that there is exactly one answer to this:

The institution of the government sanctioned corporation, itself the result of interference in the operation of market forces, must be dismantled. Governmental interference must be rolled back. Do that at a reasonable rate, and large corporate organizations such as Chrysler and Bank of America will dismantle themselves. Problem solved.

Replace your false dilemma (don’t force the corporations to do anything; don’t let the corporations continue to contribute to hosing up our economy) with a justifiable, genuine lemma — that any economic actor dependent upon governmental interference in the economy for its very existence is incompatible with a truly free market. In fact, it’s better than a lemma. It’s a tautology.


  1. So in the meantime, how does a freedom loving libertarian involve himself in making his own business when you are by law required to have a license to do business?

    Comment by Joseph A. Nagy Jr — 14 June 2009 @ 07:37

  2. That depends on the type of business. Maybe I’ll write something about the real dilemma, which you just pointed out: how to do business in a world where unethical business is (almost) the only way to do business.

    Comment by apotheon — 14 June 2009 @ 11:18

  3. i get what you’re saying, and as i agree with the assessment that corporations tend toward sociopathy, it seems like a good idea to bring about their demise. two points of contention:

    first, while the corporation is a legal creation and “the result of interference in the operation of market forces,” so is the entire idea of property. we would not really “own” property without a claim legitimized by something other than ourselves, a claim which we can enforce and seek redress when our property is removed from us. so just because it’s governmental interference doesn’t mean it’s automatically bad. i think giving a corporation legal “person” status goes too far, but on the other hand, do we not need mechanisms that allow businesses to own property and organize workers in the way that corporations do? what would you have in their place? i don’t think it’s as simple as letting the different functions of the corp become separate businesses; many of those functions couldn’t turn a profit on their own, but are nonetheless necessary.

    second, i’m wondering how to “roll back” this interference at any kind of controlled rate. either corporations have the right to exist or they don’t. how would you roll out changes in the laws so that this happened at a rate which allowed time to adjust without chaotic upheaval?

    Comment by sosiouxme — 16 June 2009 @ 06:45

  4. There are, in fact, many theories of property — some of which involve no reliance on legal convention. It’s true, however, that the current state of property law in the US is in some respects a matter of mere legal convention, but in others it may be regarded as a codification in law of protection for rights intrinsic to individual humans.

    i don’t think it’s as simple as letting the different functions of the corp become separate businesses; many of those functions couldn’t turn a profit on their own, but are nonetheless necessary.

    Anything truly necessary commands market value, and a business model based on that value can be developed.

    second, i’m wondering how to “roll back” this interference at any kind of controlled rate. either corporations have the right to exist or they don’t. how would you roll out changes in the laws so that this happened at a rate which allowed time to adjust without chaotic upheaval?

    That’s certainly an interesting challenge, and one we should be trying to address — rather than just pretending the problem of market distortions created by the existence of the corporation doesn’t exist.

    Comment by apotheon — 16 June 2009 @ 02:36

  5. As for what type of business, I have several in mind for myself. I’d like to run them as one thing though.

    a bait & tackle shop with my own homemade catfish dip bait, lawn care (lawn mowing and trimming with perhaps landscaping and winter work in the future) and possibly web design. I would like to run them all at first and then set them up with managers of their own so I can move on to other endeavors as they make me money.

    Comment by Joseph A. Nagy Jr — 16 June 2009 @ 02:48

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